FOREX Newsletter
Pulse of the Market
· Dollar regained its footing as the economic docket reinforced an improved outlook for future growth
· The ECB unanimously voted to raise the benchmark interest rate by 25bp to 1.25%
· BoE interest rate held at 0.50% while maintaining its asset purchase target at GBP 200B in April
· Commodity currencies traded mixed with CAD and AUD rising, while the NZD pared its recent gains
The U.S Dollar ended yesterday’s trading session higher against most of the major currencies. A strong aftershock in Japan drove investors back towards the Greenback and other low yielding currencies. Later it was revealed that there were no casualties or immediate reports of damage, which helped to trigger a recovery but that was not enough to turn sentiment around. Japan is the world’s third largest economy and any additional setback in economic activity has nothing but negative insinuations for the global economy. Thankfully U.S jobless claims remain low which means that the labor market is improving. Jobless claims fell 10k last week to its lowest level since Feb 26. The Single Currency traded slightly lower against the U.S Dollar yesterday. In yesterday’s trading session ECB raised interest rates by 25bp to 1.25 percent. The decision was widely expected since the central bank first brought up the possibility of a rate hike in April. There are visible problems in the peripheral economies but Germany has been performing well, giving the central bank the foundation that they need to take on inflationary pressures and make no mistake. The EUR/USD rose to a 1 year high ahead of the rate decision and if Trichet was to emphasize the need for additional tightening, the EUR/USD would probably make a run above 1.45. There are still 8 monetary policy meetings before the end of the year so even if they plan to bring interest rates to 2 percent by year’s end they could wait a month or two before delivering a second round of tightening. The time has come where policymakers around the world are actively thinking about normalizing monetary policy and the ECB is leading the charge. German trade and current account numbers are due for release today. The British Pound ended the session unchanged against the U.S Dollar after the Bank of England decided to leave interest rates steady. However, today’s producer price report could bring out a larger reaction in the British Pound. Unfortunately for the BoE, oil prices are on the rise and today’s producer price report will tell how serious of a problem inflation really is. If today’s PPI report shows inflationary pressures increasing in the month of March, it will support the case for a rate hike by the central bank and promote further gains in the Cable. The Japanese Yen ended the day higher against all of the major currencies. The BOJ kept its rates between 0.00-0.10 percent and extended its liquidity provisions with new 1 trillion Yen lending program at the conclusion of its two day monetary policy meeting.
| Time(GMT) | Economic Release | IM | Actual | Forecast | Prior |
| 04:30 | Japan Bankruptcies (YoY) (MAR) | Medium | | | -9.4% |
| 05:45 | Switzerland Unemployment Rate (MAR) | Medium | | 3.4% | 3.6% |
| 06:00 | German Trade Balance (Euros) (FEB) | Medium | | 13.0B | 10.1B |
| 11:00 | Canada Net Change in Employment (MAR) | High | | 28.0K | 15.1K |
| 11:00 | Canada Unemployment Rate (MAR) | High | | 7.7% | 7.8% |
| 12:15 | Canada Housing Starts (MAR) | Medium | | 181.0K | 181.9K |
Euro
The Single Currency fell yesterday against most of its major counterparts as a plea for financial assistance from the Portuguese government overshadowed the first hike in Euro Zone interest rates since 2008. The ECB surprised no one by hiking rates a quarter of a percent to the current 1.25%. Portuguese Prime Minister Jose Socrates, further dampened the effects of the ECB rate hike by officially announcing that Portugal will require an EU-IMF bailout. Overall, the EUR/USD traded with a low of 1.4241 and a high of 1.4336 before closing the day around 1.4307 in the New York session.
Yen
The Japanese Yen has pared some of its recent declines in yesterday’s trading session as investors purchased the safe haven currency in a reaction after a 7.4 magnitude earthquake prompted tsunami warnings in the region devastated by last month's powerful quake. The Yen will however remain a substitute for market risk, and any further aftershocks from the recent earthquake could see the Yen appreciate. Overall, the USD/JPY traded with a low of 84.58 and a high of 85.49 before closing the day around 84.92 in the New York session.
British Pound
The British Pound was slightly lower against the U.S Dollar in yesterday’s session, and gained against the Euro after the BoE left interest rates unchanged. Cable was also pressured by the sharp drop in UK industrial Production by -1.2% in February. The lack of policy change was widely expected, but investors are now considering the BoE's effectiveness as cautious with the British economy struggling after contracting in Q4. Overall, the GBP/USD traded with a low of 1.6261 and a high of 1.6343 before closing the day at 1.6322 in the New York session.
Canadian Dollar
The Canadian Dollar rose to a new 3 year high in yesterday’s trading session as oil consolidated above the $109 a barrel level, and a strong jobs market report in the U.S, which is Canada's primary trading partner, suggested that demand for Canada's energy exports will continue to grow. Overall, the USD/CAD traded with a low of 0.9568 and a high of 0.9622 before closing the day at 0.9587 in the New York session.
Euro-Yen
EUR/JPY is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also issuing a bullish stance. The RSI is above 73 and lies above the neutral zone. Overall, the cross has lost 0.80%.
Sterling-Yen
Currently GBP/JPY is trading above 14, 50 and 100 days moving average. Fast stochastic is issuing bullish and MACD is also indicating a bullish stance. The RSI is above 69 reading and lies above the neutral zone. The pair has lost 0.69%.
Aussie-Yen
Currently, the cross is trading above 14, 50 and 100 days moving average. Fast stochastic gives bullish and MACD is also indicating a bullish stance. The RSI is above 75 reading and lies above the neutral region. The cross has lost 0.35%.
Euro-Sterling
This cross is trading below 14 and above 50, 100 days moving average. Fast stochastic is indicating a bearish and MACD is also issuing a bearish signal. The RSI is above 58 reading and lies above the neutral region. The pair has lost 0.11%.
Sterling-Swiss
This cross is trading above 14 and below 50, 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is indicating a bullish tone. The RSI is above 50 and lies above the neutral region. The pair has lost 0.33%.
Appendix
| Daily Pivot Points | |||||||
| | Trading Range | | |||||
| Contract | S3 | S2 | S1 | Pivot | R1 | R2 | R3 |
| EUR/USD | 1.4158 | 1.4200 | 1.4253 | 1.4295 | 1.4348 | 1.4390 | 1.4443 |
| USD/JPY | 83.59 | 84.09 | 84.50 | 85.00 | 85.41 | 85.91 | 86.32 |
| GBP/USD | 1.6192 | 1.6227 | 1.6274 | 1.6309 | 1.6356 | 1.6391 | 1.6438 |
| USD/CHF | 0.9094 | 0.9122 | 0.9142 | 0.9170 | 0.9190 | 0.9218 | 0.9238 |
| USD/CAD | 0.9509 | 0.9538 | 0.9563 | 0.9592 | 0.9617 | 0.9646 | 0.9671 |
| EUR/JPY | 118.87 | 119.80 | 120.66 | 121.59 | 122.45 | 123.38 | 124.24 |
| GBP/JPY | 136.06 | 136.97 | 137.79 | 138.70 | 139.52 | 140.43 | 141.25 |
| CHF/JPY | 91.56 | 91.95 | 92.31 | 92.70 | 93.06 | 93.45 | 93.81 |
| AUD/JPY | 86.61 | 87.34 | 88.12 | 88.85 | 89.63 | 90.36 | 91.14 |
| EUR/GBP | 0.8655 | 0.8687 | 0.8726 | 0.8758 | 0.8797 | 0.8829 | 0.8868 |
| EUR/CHF | 1.2961 | 1.3015 | 1.3062 | 1.3116 | 1.3163 | 1.3217 | 1.3264 |
| GBP/CHF | 1.4824 | 1.4871 | 1.4912 | 1.4959 | 1.5000 | 1.5047 | 1.5088 |
Sources: News, Charts & Quotes (Courtesy: Reuters, US Department Of Treasury)
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