Yesterday the euro dropped 170 points. What was the reason? Did it happen due to Mario Draghi’s speech during yesterday’s ECB press conference? The most significant in his speech was “the exchange rate should reflect fundamentals”, “the euro’s exchange rate is near its long-term average.” In fact he admitted that the euro is overbought, despite populists words about trust to the single currency.
We have noticed several times that in January the volumes were record high, but yesterday the volumes were even higher, the all-time record for 13 months. There is no doubt that Draghi’s speech was just the reason to take buyers’ stop losses on euro buyers’ hullabaloo. We have also noted that during the second half of January the exclusion of sellers from market was observed. Thus, the way for major participants is open, now they can perform their tasks. They have clear targets, they want to strengthen the dollar during massive placement of US government bonds. As preventive measure in order to provide particular information, rating agencies are kicked off due to the Unites States Department of Justice suited Standard&Poor's. The situation is ridiculous, it can be concluded due to period of limitation on incriminating fact is over (mortgages rating was overrated).
We have also supposed that the Forex market would have inverse correlation with the stock market, during the last week it could be seen. However, the stock market may move downwards as Forex. In this regard Art Cashin, managing director of Lazard Capital Markets said they had amazing start at the beginning of the year and at the moment everyone was looking for a reason to rebound.
Today at 17:30 GMT+4 US Trade balance in December is published. It is forecast to be USD -46 bln against – 48.7 bln in November. At 19:00 GMT+4 US Wholesale inventories report for December is issued. It is expected to be 0.4% against 0.6% in November.
From the technical point of view, after the rate has consolidated under the level of 1.3397 (January 18 high), the descending moment may continue to the targets specified by support of trendlines on the H4, 1.3376, 1.3331, and 1.3308.
