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Market Review May 27, 2014

May 27, 2014

 

For the first time the head of the ECB has admitted risks of deflation, but with a remark that it is possible only in case of some negative scenarios. As a reminder earlier Draghi has denied such risks at almost every press conference, referring to positive sides of low inflation. It is supposedly good for consumers to have no abrupt rates fluctuations, especially in conditions of income growth absence.

 

On the ECB forum in Portugal he didn’t rule out the possibility of the beginning of assets purchase in case if inflation is on low levels for too long. Apparently the ECB is contemplating on the possibility of beginning of European variant of QE. It looks like such program is necessary during the crisis.

 

Earlier a lot of economists have pointed out increasing risk of deflation in Europe. The thing is that if prices go down consumers and companies will begin to cut expenditures in hope to get better prices later on. As a result demand is decreasing, what moves prices down and everyone is waiting for a third downgrade, which is supporting deflation.

 

At such scenario debt holders’ problems exacerbate a lot. Prices’ decline and consumers’ anticipation of their even bigger fall lead to reduction of tax inflow. So if we are talking about problematic countries of the Euro zone, there is no discussion about reduction of debt load.

 

If recession recurs then debts will start growing in big volumes.

 

 TECHNICAL ANALYSIS

EUR/USD

The Euro is recovering from 1.3615. There is quite challenging resistance at 1.3725. If it is overcome there might be a trend reversal. Whatsoever current bounce is currently perceived as a correction of major downward trend.

USD/JPY

 

The pair has encountered an upward resistance at 102.00. It is quite strong and the view is backed up by current consolidation of the asset below the level. The forecast in the midterm is bearish

 

GBP/USD

 

The Pound is trading without any distinguished pattern around the middle of the range between the levels marked on 2 hour chart. So analysts do not have consent about further trend. Therefore it is recommended to give an asset some time before the trend becomes more distinct.

 

ECONOMIC CALENDAR

All Day   Holiday United States – Memorial Day

All Day   Holiday United Kingdom – Late May Bank Holiday

04:30  AUD Investing.com AUD/USD Index

04:30  CAD Investing.com USD/CAD Index

04:30  EUR Investing.com EUR/USD Index

04:30  JPY Investing.com USD/JPY Index

04:30  NZD Investing.com NZD/USD Index

04:30  CHF Investing.com USD/CHF Index

04:30  GBP Investing.com GBP/USD Index

04:30  USD Investing.com Gold Index

04:30  USD Investing.com S&P 500 Index 

06:00  EUR GfK German Consumer Climate

 

May 27, 2014

 

 

For the first time the head of the ECB has admitted risks of deflation, but with a remark that it is possible only in case of some negative scenarios. As a reminder earlier Draghi has denied such risks at almost every press conference, referring to positive sides of low inflation. It is supposedly good for consumers to have no abrupt rates fluctuations, especially in conditions of income growth absence.

 

On the ECB forum in Portugal he didn’t rule out the possibility of the beginning of assets purchase in case if inflation is on low levels for too long. Apparently the ECB is contemplating on the possibility of beginning of European variant of QE. It looks like such program is necessary during the crisis.

 

Earlier a lot of economists have pointed out increasing risk of deflation in Europe. The thing is that if prices go down consumers and companies will begin to cut expenditures in hope to get better prices later on. As a result demand is decreasing, what moves prices down and everyone is waiting for a third downgrade, which is supporting deflation.

 

At such scenario debt holders’ problems exacerbate a lot. Prices’ decline and consumers’ anticipation of their even bigger fall lead to reduction of tax inflow. So if we are talking about problematic countries of the Euro zone, there is no discussion about reduction of debt load.

 

If recession recurs then debts will start growing in big volumes.

 

 

 

 

 TECHNICAL ANALYSIS

 

EUR/USD

The Euro is recovering from 1.3615. There is quite challenging resistance at 1.3725. If it is overcome there might be a trend reversal. Whatsoever current bounce is currently perceived as a correction of major downward trend.

 

 

USD/JPY

 

The pair has encountered an upward resistance at 102.00. It is quite strong and the view is backed up by current consolidation of the asset below the level. The forecast in the midterm is bearish.

 

 

GBP/USD

 

The Pound is trading without any distinguished pattern around the middle of the range between the levels marked on 2 hour chart. So analysts do not have consent about further trend. Therefore it is recommended to give an asset some time before the trend becomes more distinct.

 

 

 

ECONOMIC CALENDAR

 

 

All Day   Holiday United States – Memorial Day

All Day   Holiday United Kingdom – Late May Bank Holiday

04:30  AUD Investing.com AUD/USD Index

04:30  CAD Investing.com USD/CAD Index

04:30  EUR Investing.com EUR/USD Index

04:30  JPY Investing.com USD/JPY Index

04:30  NZD Investing.com NZD/USD Index

04:30  CHF Investing.com USD/CHF Index

04:30  GBP Investing.com GBP/USD Index

04:30  USD Investing.com Gold Index

04:30  USD Investing.com S&P 500 Index 

06:00  EUR GfK German Consumer Climate

08:00  EUR ECB President Draghi Speaks