Forex Bulletin, April 21, 2011

 

Pulse of the Market

·      U.S Dollar has fallen to a fresh record low against the Aussie and 16 month low against the Euro

·      Euro surged to break above 1.4500 and to fresh year highs on good Spanish Bond Auctions

·      BoE policy meeting minutes weighed on the Cable as it held a cautious outlook for the region

·      Australia’s leading indicators rose 0.4 percent in February while import and export prices soared

The U.S Dollar ended yesterday’s trading session lower against the basket of major currencies. Since the beginning of the year, investors around the world have been selling Dollars. Initially it was high unemployment that had everyone worried but then as the jobless rate declined, the focus shifted to U.S monetary policy.  In an environment where many central banks have expressed concern about inflation pressures, the Federal Reserve’s relaxed approach has hurt the Greenback. Standard & Poor’s warning about U.S debt also pressured the Greenback, and gave an idea why investors are moving their funds out of U.S Dollars and into other currencies. U.S jobless claims, leading indicators, and the Philadelphia Fed index of manufacturing activity are scheduled for release today. Weak data will probably accelerate the fall of U.S Dollar while strong data should provide limited support for the under pressure currency. The Single Currency ended yesterday’s session sharply higher against the U.S Dollar. Euro closed above 1.4500 for the first time since January 2010. Although German producer price growth was softer than expected but strong demand for Spanish bonds and a general aversion for U.S Dollar drove the EUR/USD sharply higher. Today’s German IFO report poses another risk for the currency. Manufacturing sector PMI, the ZEW survey, industrial production and factory orders all point to stronger business activity. The British Pound also rose strongly against the U.S Dollar. Cable investors were disappointed by the central bank’s lack of concern about price pressures. According the minutes from the last MPC meeting, policymakers believe that wage growth remains limited, posing little long term risk to prices. The Monetary Policy Committee voted just the same way they did in April as they had in March with Dale and Weale favoring a 25bp rate hike and Sentance voting for a 50bp hike. The Japanese Yen traded lower against all of the major currencies with the exception of the U.S Dollar. The latest economic data from Japan showed how much damage the earthquake had on economic activity. Japan’s trade surplus fell from 653.3B Yen to 654.1B Yen in the month of March due to a 2.2 percent decline in exports. Imports on the other hand rose 11.9 percent, but the increase was mainly due to higher import prices.

Time(GMT)	Economic Release	IM	Actual	Forecast	Prior
05:00	Japan Coincident Index (FEB)	Low			106.3
08:00	German IFO - Business Climate (APR)	Medium		110.5	111.1
08:30	U.K Public Sector Net Borrowing (Pounds) (MAR)	Medium		18.7B	10.3B
08:30	U.K Retail Sales (MoM) (MAR)	Low		-0.4%	-1.0%
12:30	Canada Retail Sales (MoM) (FEB)	High		0.5%	-0.3%
12:30	U.S Initial Jobless Claims	Low		390K	412K
14:00	U.S House Price Index (MoM) (FEB)	Medium		-0.3%	-0.3%
14:00	U.S Philadelphia Fed. (APR)	Medium		36.8	43.4

Euro

The Single Currency surged from the start of Asian trading session to break above 1.4500 and to fresh year highs. EUR/JPY and EUR/GBP also leapt higher with the market focusing on good Spanish Bond Auctions and talk China would revalue its currency lower. Rising equities, commodities, and relatively strong economic reports in the world's largest economies have encouraged investors to embrace riskier, but higher yielding, assets like the Euro. Overall, the EUR/USD traded with a low of 1.4327 and a high of 1.4546 before closing the day around 1.4521 in the New York session.

Yen

The Japanese Yen hit day highs in Asian trading session with the major above 83.00 Yen before reversing in the U.S trading session as the U.S Dollar weakness overwhelmed. AUD/JPY and EUR/JPY moved higher and have resumed the uptrend. Lower yielding currencies like the Japanese Yen, Swiss Franc and U.S Dollar were under pressure yesterday as investors reassume riskier positions. Overall the USD/JPY traded with a low of 82.24 and a high of 83.09 before closing the day around 82.56 in the New York session.

British Pound

The British Pound moved to 1.6400 but underperformed the rest of the market on the back of disappointing MPC minutes. Minutes from the BoE's March meeting were released yesterday, which showed that the MPC voted 6 to 3 to keep rates on hold at the record low 0.5%, the same voting record as last month. However, investors still expects at least a 0.25% hike by November, a pace slower than that of the ECB, but likely more aggressive than that of the Fed. Overall the GBP/USD traded with a low of 1.6306 and a high of 1.6425 before closing the day at 1.6403 in the New York session.

Canadian Dollar

The Canadian Dollar rose to a fresh high against the Greenback. Retail sales are due for release from Canada today and concerns about consumer spending explain why the Loonie gave up earlier gains to end the day only slightly higher than the U.S Dollar. Nearly 3 percent rise in oil prices should have been very supportive for the Loonie but the drop in wholesale sales earlier this week points to the possibility of a weaker retail sales report.  Overall the USD/CAD traded with a low of 0.9495 and a high of 0.9562 before closing the day at 0.9523 in the New York session.

Euro-Yen

EUR/JPY is trading below 14 and above 50, 100 days moving average. Fast stochastic is giving a bearish tone and MACD is also issuing a bearish stance. The RSI is above 56 and lies above the neutral zone. Overall, the cross has gained 1.28%.

Sterling-Yen

Currently GBP/JPY 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 51 reading and lies above the neutral zone. The pair has gained 0.53%.

Aussie-Yen

Currently, the cross is trading above 14, 50 and 100 days moving average. Fast stochastic gives bearish and MACD is also indicating a bearish stance. The RSI is above 61 reading and lies above the neutral region. The cross has gained 1.76%.

Euro-Sterling

This cross is trading above 14, 50 and 100 days moving average. Fast stochastic is indicating a bullish and MACD is issuing a bearish signal. The RSI is above 58 reading and lies above the neutral region. The pair has gained 0.76%.

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 41 and lies below the neutral region. The pair has lost 0.77%.

Appendix

Daily Pivot Points
			Trading Range
Contract	S3	S2	S1	Pivot	R1	R2	R3
EUR/USD	1.4164	1.4246	1.4383	1.4465	1.4602	1.4684	1.4821
USD/JPY	81.32	81.78	82.17	82.63	83.02	83.48	83.87
GBP/USD	1.6212	1.6259	1.6331	1.6378	1.6450	1.6497	1.6569
USD/CHF	0.8707	0.8791	0.8834	0.8918	0.8961	0.9045	0.9088
USD/CAD	0.9424	0.9460	0.9491	0.9527	0.9558	0.9594	0.9625
EUR/JPY	116.52	117.38	118.64	119.50	120.76	121.62	122.88
GBP/JPY	133.64	134.15	134.79	135.30	135.94	136.45	137.09
CHF/JPY	90.87	91.29	92.13	92.55	93.39	93.81	94.65
AUD/JPY	85.68	86.24	87.34	87.90	89.00	89.56	90.66
EUR/GBP	0.8696	0.8737	0.8794	0.8835	0.8892	0.8933	0.8990
EUR/CHF	1.2776	1.2831	1.2862	1.2917	1.2948	1.3003	1.3034
GBP/CHF	1.4386	1.4472	1.4518	1.4604	1.4650	1.4736	1.4782

 

 

 

 

 

 

 

 

Sources: News, Charts & Quotes (Courtesy: Reuters, US Department Of Treasury)