Dollar Passions or the First Quarter Passed

Positive basic statistics regarding Eurozone, increase of GDP prediction for 2015 from 1% to 1.5% retains the possibility of EUR/USD growth towards 1.1150-1.1250
Hard times are coming. The USA are summarizing disastrous data on employment growth; Europe and China are with hopes for recovery and new Greek debts. The power of the current bull dollar trend raises doubt for the first time in 9 months. At the same time, it is now that ECB needs euro strengthening - there is much statistics and Greek "painful" points lying ahead. Thin pre-Easter Friday market and the absence of large players helped the main currencies to become stronger, euro (1.1035), Canadian dollar (1.2485), and yen (119.935) were record-breakers.

The weakest data on the American labor market for the last fifteen months disappointed many investors who made bids on confident statistics after neutral weekly reports. The level below 200 thousand jobs was painfully received by the American economy; in March, twice as less jobs were created as compared to those predicted, and in January-February, the data was revised towards decrease (by 69 thousand). Oil prices play quite an important role in that negative - last month, the highest reductions took place particularly in mining, engineering, and construction branches of fuel industry. Because of weather conditions, 182 thousand workers were not able to work (it is 30 thousand above regular numbers). However, there is a chance that the data received wrong interpretation:

- Employment level stayed at the previous level of 5.5%;
- The more representational indicator U6 went down by 0.1% to 11.9%;
- Average duration of work week fell by six minutes;
- There is a growth of hourly wages by 0.3%;
- The demand for qualified workers is growing.

It can be believed that the labor market has practically recovered. Also, such companies as Wal-Mart and Mc Donald's announced salary increase for starting positions. It is possible that slowing down of job growth is associated with natural saturation of the labor market and weak NFP with 100-190K is not a recess value any more. In any case, FRS has additional grounds for keeping zero rate at least till the end of summer. It is logical to assume that assessment of the accuracy of those data can be done only after the next report at the beginning of May when it will be clear if the March negative was a regular provocation or market noise that required adjustments and corrections.

Today, Eurozone is full of problems and contradictions, and even the current weakness of dollar does not guarantee it quiet life. It can be said that the QE program launched by ECB has been accepted by the market basically positively, sentiment indexes (PMI) are quite stable. The absence of agreements regarding the Greek issue is causing the negative; however, only Eurozone ministers' meeting planned for April 24 can shift that process. Meanwhile, Greece, through Cipras's statements (after his trip to Russia) makes confident promises to make the first payment in time (450 mln euro on April 9). It is hard to believe it, though.

Europe is coming back after the Easter week-end. There is a response to today's business activity indexes in the Eurozone countries' service sector - drawdown to 1.0840. However, quite positive basic statistics regarding Eurozone, increase of GDP prediction for 2015 from 1% to 1.5% retains the possibility of EUR/USD growth towards 1.1150-1.1250. However, although the pair lost all its drive during Monday after Friday, the goals for sales growth in the area of 1.8020-1.0800 (current support 1.0790) have all chances of life. Even if Greece with its debts improves the picture, it is worth to grow upward positions in short-term on pullbacks only for quick sales using the data of American business activity in nonproduction area and the FOMC March meeting protocol as the fundamental grounds. The time will show; however, meanwhile, regarding euro - let's look downwards and watch dollar.

Author: Navsher Bartash,
ForexChief Currency strategist