Daily Market Review — 21/01/2016
ECB Meeting – The Main Event Today
In the first half of yesterday’s trading day, the euro strengthened against the US currency because investors try to avoid the risk. Let us remind, investors often use the euro as a currency funding, and that generates increased demand for it. However, the dynamics of pair started to show downward trend. Producer price index, as one of the indicators of inflation, at the end of December showed a sharp decline, and put some pressure on market. On the other hand, the American data on inflation were mixed. Thus, the total inflation rate was 0.1% in monthly terms, and the annualized rate came in at 0.7% while the forecast increase of 0.8%. As for core inflation, the figure came out on a fairly positive level – 2.1% growth year on year. Let us remind, target inflation rate set by the US Federal Reserve, is 2%. Further developments will depend on the announcement of the results of the ECB meeting today at 12:45 (GMT). At 13:30 (GMT) to be held a press conference the head of the European regulator, Mario Draghi. Markets do not expect a change in the current monetary policy, but at the same time, investors will try to find hints of the possible extension of stimulus measures at its next meeting in March.
Resistance: 1.0904, 1.0943, 1.0991
Support: 1.0858, 1.0803, 1.0769
The pair continues its upward trend for the third week in a row. Such dynamics is caused, first of all, by a huge drop in oil prices. Let us remind that oil is one of the main revenue items of the Russian budget. “Black Gold” continues a downward trend against the background of a significant oversupply in the world market, as well as concerns over a slowdown in the Chinese economy, which is the second largest oil consumer in the world. The negative dynamics of the ruble is likely to continue into the near future, as there are no prerequisites for the growth of the oil’s prices. The start of fiscal period may slightly support Russian currency. During this period exporters sell currency in order to pay off the country’s budget. Nevertheless, the prospects for the Russian currency remains extremely negative, at least in the near future – the pair will continue to set the next abysmal record.
Resistance: 81.4468, 82.0000, 82.5000
Support: 78.4105, 77.0675, 76.0943
Major European stock exchanges showed a significant drop yesterday − about 3%. Such dynamics was caused by the IMF report on the prospects for the global economy. In particular, the report pointed to the negative outlook for 2016 for global growth, however, IMF pointed – there are no signs of a new financial crisis. In addition, the report of the International Energy Agency published on Tuesday, continues to put pressure on oil, which contributes to the exit of investors from the stock as one of the risky assets. Some support yesterday had data on the UK labor market. Thus, according to the data presented, ILO unemployment rate was 5.1% compared to the average forecast of experts at the level of 5.2%. Today, the investors will pay attention to the results of the ECB meeting, which will be announced in 12:45 (GMT). Particular attention will be riveted to the press conference by Mario Draghi, scheduled to start at 13:30 (GMT).
Resistance: 9608.92, 9679.87, 9768.56
Support: 9406.21, 9337.17, 9260.37
The precious metal quotations showed strong growth yesterday. Investors use this defense asset against the backdrop of the continuing fall in oil prices, the overall weakening of the US currency, as well as the fall of stock markets. Significant impact on the course of yesterday’s trading had the American statistics on inflation. Thus, according to yesterday released data, the total inflation rate unexpectedly fell in December by 0.1%, while in annual terms grew less than expected, most of the experts. Together with the negative reports on retail sales and industrial production, published last Friday, yesterday’s statistics can force the Fed to reconsider rate hikes. The slower pace of monetary tightening by the US Federal Reserve will provide some support to gold. Today, the publication of data on the US labor market, which is traditionally presented at 13:30 (GMT), may influence the dynamics of trade.
Resistance: 1108.16, 1112.74, 1120.00
Support: 1097.36, 1092.12, 1083.37