The U.S. dollar index fell on Monday. Now this is only correction - 7.1.2014

On Monday, there was U.S. dollar index (USDIDX) decline observed. That is how market participants reacted to the economic data publication, which were worse than the preliminary forecasts. The ISM Non-manufacturing fell to its lowest level since June 2013 and reached 53 points. It is expected to increase to 54.5 points. We believe that this is not so bad, and we believe that the decline in the dollar index is a normal correction. The general trend on stronger dollar is still in place.

However, this week will be full of important events. The situation in the currency market may change. Meanwhile, today, and tomorrow the neutral trend is most probable. It is possible that it will end with a noticeable movement in prices. The ECB and the Bank of England meeting will be held on Thursday. The interest rates are 0.25 % and 0.5%, respectively. Their changes are not expected, but as usual several important statements at the final press conference are to be made. On Friday, there are the U.S unemployment data expected. The preliminary forecast for now is slightly negative. In this regard, according to the U.S. Commission on Commodity Futures Trading (CFTC), the aggregate volume of open positions based on the further U.S. dollar strengthening fell to its lowest level in six weeks and reached $ 17.5 billion .

Today, we expect the unemployment data for Germany coming out at 8-55 GMT (0). Theoretically, they could affect the euro if they differ greatly from the neutral predictions. The U.S. trade balance will be announced at 13-30 GMT (0).

The business activity index for Canada comes out at 15-00 GMT (0). We do not exclude that it will be positive. It can increase (decrease in the chart) Canadian (USDCAD) Dollar price. Note that according to the CFTC, the volume of short positions on the Canadian dollar is three times higher than the volume of long positions. If Loonie starts getting stronger, the movement can be enhanced by triggering stop-loss orders. However, it is not easy to predict the further trend. In part, bears have a support from the government, which rightly believes that the low rate helps the growth of industrial production. We do not expect that the Canadian government will move from words to action right now. The Central Bank meeting is to be held on January 22. The overnight target rate is 1%. It has not been changed since September 2010 and is unlikely to change after the forthcoming meeting. On January 10, there are unemployment data on Canada for December expected. They can affect the exchange rate

British pound (GBPUSD) continued its decline against the U.S. dollar. The services PMI in the UK was worse than the preliminary forecasts. Note that the Bank of England performs the asset purchasing by printing money, as well as the U.S. Federal Reserve and Bank of Japan. The total volume is set at 375 billion pounds. It is not expected to change.

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