Yesterday the European currency surprised us very much, showing the growth almost till the closure of the trading session. From the first hours of Asian trading session the dollar started to lose its positions. Breaking through some of the resistance levels, the pair had been trading near 1.3967, after that it was able to reach the resistance level of 1.3995. Waiting for the opening of the American trades, the Euro again jumped up, showing the sessional maximum at the level of 1.4071. Totally, the European currency grew against the dollar for 149 points, the volatility rate amounted 213 pips.
Yesterday\'s market movement was due to G8 summit, which would finish its work today in Italy. Let\'s speak about it in more details. Leaders of G8 have not chosen a definite way of surmounting the crisis by countries. They left the development of more fundamental projets for their Governments. It is clear from the statement that «despite the signs of stabilization, the world economy is still in a weakened condition and the Governments should not stop the fiscal support measures». Considering their words, the economic situation remains uncertain, but there are also significant risks for economic and financial stability.
Heads of the states also announced about the intention to continue to strengthen their countries\' economies «making the macroeconomic stimulus at saving price stability and providing the financial durability». It was said that the leaders agreed to organize the actions in developing «post - disaster» programs, which are to be applied to many of the countries while choosing measures in economic policy in the nearest future.
Countries with a low revenue level were not left without attention. Heads of G8 in their compellation to the IMF asked to look into the posibility of franchising more applications, as it could considerably strengthen further prospects of surmounting the world crisis.
In the conclusion about the first two days of G8 summit. This year the world economy is forecasted to reduce for 1,4%, a little bit worse than 1,35 predicted in April, next year it will increase for 2,5%, which is higher for 0,6% than it was expected in April.
Speaking about the fundamental Eurozone data, the consumer price index in Germany remained at the previous level of 0.40%. This again says that we should not consider for increasing of the Eurozone interest rates in the near future, but the deflation is not draw on Europe too. The trade balance surprised market participants, had been risen from the level 8.90B to 10.30B. This supported the European currency, allowing to reach the third resistance level near 1.3967.
We should not left without attention the ECB report. According to the opinion of their analysts, the current hard financial and economic crisis did not lead to the dollar\'s positions erosion in the global financial system, it also did not enhance the Euro attraction. It is connected with the fact that the economic crisis challenged the U. S. dollar status as the world international currency, which lived up all assigned duties. During the past year against the backdrop of the crisis there was not increasing in demand of the Euro, which again says about some investors\' and banks\' non — confidence to this currency under «a throng time».
Speaking about the U. S. macroeconomic statistics, I want to mention that jobless claims have been sharply decreased. They amounted 565,000 against forecasted figures of 610,000. So the level of 1.40 again became an actual one.
The technical picture is becoming a rather interesting. Yesterday\'s down — going channel did not make amends for its confidence, so we would not take it into the account. An interesting situation get the picture of «extending formation». This figure has a very difficult construction and is the most dangerous for the market. According to this, the main task for us now will be the trading from the support and resistance levels. Don\'t forget to pay attention to Bollinger bands, which are also showing good levels.
The support levels are near the levels 1.3949, 1.3925, 1.3885.
The resistance levels are 1.3995, 1.4052, 1.4070.
There are no serious fundamental data on the Eurozone to be released today. You only have to pay attention to the industrial output in France and Italy. Vice versa, the important data on the trade balance in the USA will be released today, which is to be decreased to -30.00B. The import price index will have to show the growth of 1.80% against the previous period.
In conclusion, I want to add that some of the major banks returned to its pre — crisis practices and methods of business conducting. Let\'s hope that the Central Banks and politicians will not allow an emerging, dangerous trend again, which could overgrow to the crash.
I recommend you to buy the pair at 1-hour timeframe closing above the level 1.4008 with the target — T/P 1.4054 and S/L 1.3962.
To sell the pair at 1-hour timeframe closing below 1.3959 with the target – T/P 1.3914 and S/L 1.4010.
With best wishes!
Analyst: M. A. Magdalinin.