Pulse of the Market
· U.S Dollar may gather pace going into the weekend as it benefits from the rise in safe haven flows
· Moody’s Investor Services lowered Spain’s credit rating to Aa2 from Aa1
· BoE held rate at 0.50% and asset target at 200B Pounds, central bank maintained its current policy
· RBNZ came out and cut rates by a more aggressive 50 basis points to 2.50%
The U.S Dollar ended the yesterday’s trading session almost unchanged against the basket of major currencies as growing tensions in the Middle East and European debt worries made investors nervous about the outlook for the global economy. Moody’s downgraded Spain’s sovereign debt rating, China reported its largest trade deficit in 7 years while the U.S, Canada and Germany all reported weaker trade numbers. This was noticeably too much for investors to handle as they took their funds and stacked into the safety of the Greenback. On the economic docket, Jobless claims jumped by 26k to 397k last week. The more worrisome figure was the trade deficit which widened to -$40.6B from -$46.3B. Euro traded sharply lower against the U.S Dollar yesterday pressured by the Moody's surprise downgrade which reminded investors about the severity of the sovereign debt troubles in Europe and there is an urgent need for a resolution. Downgrades reflect a greater risk of default and Euro Zone cannot afford to bail out Spain at this time which is one of the larger economies within the Euro Zone. Investors are not hopeful because European officials have signaled that they want to spend more time on discussing a competitiveness pact and greater cooperation. Weaker European economic data also led the slide in the Euro. The market had been looking for the German trade surplus to increase but it declined due to a one percent drop in exports and a larger increase in imports. The British Pound sold off aggressively against the U.S Dollar yesterday. The bounce back in the Cable on Wednesday was extremely short lived. Economic data from the U.K was better than expected but investors were disappointed by the fact that the BoE did not raise interest rates. Cable investors are disappointed by the central bank’s lack of action and by Moody’s downgrade of Spain. Stronger industrial production and the manufacturing production reports showed the manufacturing sector continuing to grow at a healthy rate in the month of January. The increase in growth was the fastest in 16 years. Japanese Yen traded higher against all of the major currencies except for the U.S Dollar. Even though the quarterly pace of GDP growth in the fourth quarter was unchanged and on an annualized basis GDP growth was revised down to -1.3 from -1.1 percent. Aussie also ended the session lower following weaker economic data and risk aversion. Australian labor data missed its mark and printed at -10.1K versus 20.8K eyed. The news further minimizes the chances of any additional rate hikes from the RBA.
Time(GMT) | Economic Release | IM | Actual | Forecast | Prior |
08:00 | EUR German Consumer Price Index (MoM) (FEB) | Medium | 0.5% | 08:00 | |
12:00 | CAD Net Change in Employment (FEB) | High | 23.5K | 69.2K | |
13:30 | USD Advance Retail Sales (FEB) | High | 0.9% | 0.3% | |
14:55 | USD U. of Michigan Confidence (MAR) | High | 76.3 | 77.5 | |
15:00 | USD Business Inventories (JAN) | Low | 0.7% | 0.8% |
Euro
The Single Currency was hit hard in the yesterday’s European trading session as Moody's downgraded Spain and increased the estimated loan losses. Also weighing on the Single Currency was German Trade balance which dropped to 1.2 billion vs. 13.7 billion previously. Overall the EUR/USD traded with a low of 1.3774 and a high of 1.3923 before closing the day around 1.3797 in the New York session.
Yen
The Japanese Yen broke above 83.00 Yen on the strong U.S Dollar demand but most crosses tracked the stock markets lower with EUR/JPY leading the pack. The outlook for many pairs is closely linked to the stock market performance which could be starting a correction given the size of the move yesterday. Overall the USD/JPY traded with a low of 82.69 and a high of 83.16 before closing the day around 82.96 in the New York session.
British Pound
The British Pound ended the yesterday’s trading session lower against the U.S Dollar. Bank of England held rate at 0.5% as expected and the market quickly looked to the other factors such as the stock market plunged and weakness in the Single Currency to guide the Cable lower. Overall the GBP/USD traded with a low of 1.6037 and a high of 1.6212 before closing the day at 1.6058 in the New York session.
Australian Dollar
The Australian Dollar was lower yesterday as sentiment was hurt with a -10k February Jobs reports vs. +20k forecast. Adding extra weight to the selling was the surprise Chinese trade deficit with the market focusing attention on the giant Asian economy which has major trade links to Australia. Overall the AUD/USD traded with a low of 0.9990 and a high of 1.0116 before closing the day at 1.0006 in the New York session.
Euro-Yen
EURJPY is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bearish tone and MACD is issuing a bullish stance. The RSI is above 58 and lies above the neutral zone. Overall the cross has lost 0.50%.
Sterling-Yen
Currently GBPJPY is trading below 14 and above 50, 100 days moving average. Fast stochastic is issuing bearish and MACD is also indicating a bearish stance. The RSI is above 49 reading and lies below the neutral zone. The pair has lost 0.57%.
Aussie-Yen
Currently, the cross is trading below 14 and above 50, 100 days moving average. Fast stochastic gives bearish and MACD is also indicating a bearish stance. The RSI is above 48 reading and lies below the neutral region. The cross has lost 0.67%.
Euro-Sterling
This cross is trading above 14, 50 and 100 days moving average. Fast stochastic is indicating a bullish and MACD is also issuing a bullish signal. The RSI is above 59 reading and lies above the neutral region. The pair has gained 0.08%.
Sterling-Swiss
This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is also indicating a bearish tone. The RSI is above 40 and lies below the neutral region. The pair has lost 0.60%.
Appendix
Daily Pivot Points | |||||||
Trading Range | |||||||
Contract | S3 | S2 | S1 | Pivot | R1 | R2 | R3 |
EUR/USD | 1.3591 | 1.3682 | 1.3740 | 1.3831 | 1.3889 | 1.3980 | 1.4038 |
USD/JPY | 82.24 | 82.47 | 82.71 | 82.94 | 83.18 | 83.41 | 83.65 |
GBP/USD | 1.5818 | 1.5927 | 1.5993 | 1.6102 | 1.6168 | 1.6277 | 1.6343 |
USD/CHF | 0.9197 | 0.9239 | 0.9279 | 0.9321 | 0.9361 | 0.9403 | 0.9443 |
USD/CAD | 0.9616 | 0.9648 | 0.9700 | 0.9732 | 0.9784 | 0.9816 | 0.9868 |
EUR/JPY | 113.00 | 113.59 | 114.04 | 114.63 | 115.08 | 115.67 | 116.12 |
GBP/JPY | 131.20 | 132.04 | 132.65 | 133.49 | 134.10 | 134.94 | 135.55 |
CHF/JPY | 88.28 | 88.48 | 88.74 | 88.94 | 89.20 | 89.40 | 89.66 |
AUD/JPY | 81.73 | 82.28 | 82.65 | 83.20 | 83.57 | 84.12 | 84.49 |
EUR/GBP | 0.8472 | 0.8502 | 0.8546 | 0.8576 | 0.8620 | 0.8650 | 0.8694 |
EUR/CHF | 1.2701 | 1.2766 | 1.2812 | 1.2877 | 1.2923 | 1.2988 | 1.3034 |
GBP/CHF | 1.4695 | 1.4814 | 1.4890 | 1.5009 | 1.5085 | 1.5204 | 1.5280 |
Sources: News, Charts & Quotes (Courtesy: Reuters, US Department Of Treasury)
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