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Until Friday the dollar continued its decline against the basic currency basket, with exception of its Canadian associate. In this pair the correction began on Wednesday, November 7th, immediately on reaching the 50-year low of 0.9060. The roll back was also impressive. Over the following three business days the US dollar grew by 600 points.
On Thursday both the Bank of England and the ECB left the rate unchanged, but the correction on majors took place only on Friday. Before that the pound reached its 26-year high of 2.1160, and the Euro -1.4750. The Euro correction first was not so impressive. The Friday low was 1.4630 but on Monday night it continued and the Euro declined by 100 more points.
The Friday events developed according to an unusual scenario. First a quite deficient trade balance of Great Britain was announced, but the pound grew on this news by 100 points. It was followed by a continuous decline to 2.0890, which was prompted by the American trade balance surpassing expectations. Immediately after the Japanese session opening, the pound continued its decline started on Friday, and to the level of 2.0580 any obstacles to this trend are not likely to appear.
As we have already mentioned, there appear signs of the English economy growth slowing. However the strongest influence on the Euro and pound decline was the closing of carry trade transactions, due to which the cross rate pound- yen passed on Friday from 238 to 231 - 700 points, and on Monday - 600 additional pips - to 225.11. This trend is reminiscent of the summer events, when this cross rate fell from 251 to 219 and 30 figures were formed within three weeks, i.e. 3, 000 points. Now and then as the decline drivers were the crisis of the American mortgage and the dollar fall against the Japanese yen. Now and then the dollar-yen rates began its decline much earlier anticipating the main events. The high of 124.15 was reached on June 22nd, almost a month before the cross rates collapse and the credit crisis. This fall decline started with 115.92 on November 1st, a week before the next wave of mortgage fears. The dollar-yen low is at 109.12, what can prove to be the intermediate resistance level before approaching 108.75 in the short term perspective and 107 - in the mid-term perspective. The long-term goal is 105.24, but if the present decline rates continue, the goal may be achieved by the end of December.
The sharp tendencies of the recent days indicate the serious concerns of the currency market as well as stock and commodity markets participants. The correction on majors – the Euro and the pound, does not yet look like a turn of the general trend. But due to the dollar drop against the yen, the European currencies growth will clearly slow down. It will have a particularly strong influence on the pound.
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Return Analysis
