FOREX Newsletter
Pulse of the Market
· Bearish sentiment underlying the U.S Dollar may intensify as the deficit dampens the outlook for growth
· European Central Bank President Jean Claude Trichet softened his hawkish outlook for monetary policy
· The British Pound surged to a fresh yearly high as the economic docket reinforced an improved outlook
· Canadian retail sales increased 0.4 percent in February after falling 0.4 percent the previous month
The U.S Dollar traded lower against the basket of major currencies in yesterday’s trading session. The weakness of the U.S Dollar was so distinct that it reached fresh year to date lows against every major currency except for the Japanese Yen. There are no major economic reports on the calendar today which means that it should be a quiet trading session. U.S markets are closed but the foreign exchange remains open. Jobless claims retreated to 403k after blowing out to 416k the prior week. Although this represented an improvement but the decline was less than economists had anticipated. Continuing claims on other hand reached its lowest level since September 2008. Manufacturing activity in the Philadelphia region also slowed materially. The Philly Fed index dropped to 18.5 for the month of April from 43.4 with the primary components of the report showing that how weak manufacturing activity really is. Unless there is a strong catalyst for a reversal, it will be very difficult to convince investors to buy U.S Dollar. The Euro ended the yesterday’s trading session higher against the U.S Dollar bur lost its value against the British Pound, Swiss Franc and Japanese Yen. Economic data from Euro Zone was strong but concerns about sovereign debt troubles and the risk of more serious problems has led to profit taking in the currency. German IFO survey printed a bit weaker than anticipated coming in at 110.4 versus 110.6 forecast. The Current assessment component hit a new record high of 116.3. As inflation concerns begin to force the ECB to take further action and raise rates in order to restrain prices, such action would strengthen the Euro. Cable traded sharply higher against the Euro and U.S Dollar following strong consumer spending numbers. Regardless of a decline in demand for clothing and household goods, spending on food was very strong. Retail Sales for the month of March grew by 0.2 percent against an expected contraction of 0.5 percent. However the stronger economic reports do not draw away from the fact that the monetary policy committee is in no rush to raise interest rates. The Japanese Yen ended the session higher against all of the major currencies. Household Confidence fell more than expected following the quake to 38.3, hitting the lowest mark in over 14 months ending in March. The report, which measures the total value of services purchased by businesses and is thought to be a leading indicator of economic health, printed an increase of 0.8% to a seasonally adjusted level of 99.3. The Australian Dollar ended the day not far from its year to date high against the U.S Dollar. The Canadian Dollar on the other hand gave up all of its earlier gains to end the day unchanged.
| Time(GMT) | Economic Release | IM | Actual | Forecast | Prior |
| 06:45 | French Business Confidence Indicator (APR) | Low | | 109.0 | 109.0 |
| 06:45 | French Production Outlook Indicator (APR) | Low | | 19.0 | 21.0 |
| 08:00 | Italian Retail Sales (YoY) (FEB) | Low | | 0.5% | -1.2% |
Euro
The Single Currency ended yesterday’s trading session slightly higher against the Greenback after pulling back from a 16 month best of 1.4647. Euro remains well supported on diverging monetary policy in the U.S and Euro Zone. With the gap between the ECB and the Fed's benchmark rates expected to widen in the coming months, the euro will remain well supported even with the continued debt concerns. Overall, the EUR/USD traded with a low of 1.4504 and a high of 1.4647 before closing the day around 1.4552 in the New York session.
Yen
The Japanese Yen being a low-risk safe haven currency, gained on the weak jobless claims report in the U.S that suggested that the slow pace of economic recovery will constrain the Fed's ability to raise interest rates this year. Household Confidence fell more than expected following the tremble to 38.3, hitting the lowest mark in over 14 months ending in March. Overall, the USD/JPY traded with a low of 81.61 and a high of 82.58 before closing the day around 81.83 in the New York session.
British Pound
The British Pound extended its recent gains yesterday after a report showed that U.K retail sales unexpectedly rose, and the U.K budget deficit was below economists' expectations. Sales surged by 0.2%, higher than the 0.5% decline expected, buoyed by rising food and gas prices. With the BoE widely expected to begin raising interest rates later this year to combat rising inflation, Cable will remain well supported until the Fed shows some appetite for higher interest rates. Overall, the GBP/USD traded with a low of 1.6385 and a high of 1.6598 before closing the day at 1.6521 in the New York session.
Canadian Dollar
The Canadian Dollar pushed to a fresh three year high below 0.95 as investors sought higher-yielding assets. However, the Canadian Dollar pulled back from its top after the labor report in the U.S, the largest market for Canadian exports, showed continued weakness. Canadian retail sales increased 0.4 percent in the month of February after falling 0.4 percent the previous month. The latest consumer spending report shows that the Canadian economy is improving but so far the momentum is lacking. Overall, the USD/CAD traded with a low of 0.9453 and a high of 0.9536 before closing the day at 0.9526 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 53 and lies above the neutral zone. Overall, the cross has lost 0.66%.
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 lost 0.17%.
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 58 reading and lies above the neutral region. The cross has lost 0.57%.
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 54 reading and lies above the neutral region. The pair has lost 0.51%.
Sterling-Swiss
This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bullish stance and MACD is indicating a bearish tone. The RSI is above 44 and lies below the neutral region. The pair has gained 0.51%.
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)
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