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Analysis |
 Return Analysis
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Currency Market Summary for the week of October 1st - 5th, 2007.
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As expected, the ECB and the Bank of England left the rates unchanged and Trichet’s comments did not contain any hints of a possible intervention due to a high Euro rate. The levels shown in the previous summary were confirmed by the market. The Euro rate went below the level of 1.4040 for only 9 points, and the breakthrough by the pound of 2.0370 resulted not only in testing of 2.0340 but to a false break through 2.0300. Friday information on the labor market in the USA (Non-Farm Payrolls) provokes strong movements in these pairs. As a result the Euro rate went to 1.4168 and the pound to 2.0441.
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It’s too early to talk about a trend continuation for these two currency pairs as the data on the USA show that the economy is stable and the FRB has no need to reduce the discount rate on October 31st. Any movement higher than 1.4170 and 2.0480 may be considered as a good opportunity for aggressive sales with the goals at 1.4040-1.3980 and 2.0280-2.0225. As for the Swiss franc, the situation is even more interesting. Having reached 1.1622 last week, it started to weaken against the dollar and by Friday it lost almost 250 points, having tested the level of 1.1854. While the European currencies move more or less synchronically, now these movements are completely independent, which can be seen from sharp variations of the cross rates, especially the cross rate Euro-pound. Our careful forecast on the raise of the dollar-yen raise was confirmed. It broke through the upper range of the channel and went up to 117.90. In case this level does not resist the buyers’ pressure, the next goals will be 118.70 and 119.35.
The Canadian dollar continued its rally. Strengthening against the American dollar, it broke through 0.99 and even 0.98. The rate was even at 0.9784. Our suggestion that it was going to be difficult for the US dollar to form a stable correction has been confirmed, but such an intensive trend continuation came as a surprise. However, there are sufficient reasons to believe that the rate is approaching the level of 0.99 and a little higher 0.9940 in the near future. But if the crude oil price renews the record highs, the trend continuation in relation to the Canadian dollar is quite probable.
Monday is a day-off in the USA, Canada and Japan, so in the second half of the day variations with false breakthroughs of the important technical levels are possible in the thin market.
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