FOREX Newsletter

Pulse of the Market

• The Federal Reserve will be holding a press conference after their monetary policy announcement
• Euro won’t be able to hold itself up on momentum alone as rate expectations fall apart
• Cable investors are as interested in the first quarter GDP reading like BoE, government policy makers
• Australian Dollar will offer a tempered response to all but the most dramatic inflation report

The U.S Dollar ended Friday’s trading session unchanged against the basket of major currencies. Friday was a much needed break for investors ahead of another busy week in the financial markets. There are 2 central bank rate decisions and a number of GDP reports on the calendar. For the first time ever, the Federal Reserve will be holding a press conference after their monetary policy announcement. The FOMC announcement will be made on Wednesday followed by a press conference. Releasing the statement and following it up with a press conference creates two separate opportunities for volatility. The central bank has a very big decision to make before their June meeting and Ben Bernanke could use this week as an opportunity to start preparing the market for a change in monetary policy. If the FOMC statement this week and the tone of Bernanke’s comments show that the central bank is still deadlocked on what to do after June, the Greenback could extend its losses. Aside from the FOMC rate announcement, new home sales, durable goods, consumer confidence and first quarter GDP numbers are also scheduled for release this week along with jobless claims, pending home sales, the Chicago PMI report, personal income and personal spending. The Single Currency ended Friday’s session unchanged against the U.S Dollar. There has been some speculation in the past week that Greece could require restructuring of their debt and if this occurs, it would weigh the Euro. After raising interest rates earlier this month, comments from ECB officials suggests that they are still thinking about tighter monetary policy, which is in line with the market’s expectations and explains the significant strength of the Euro. As long as ECB officials continue to talk about the need for rate normalization, the Euro should remain the outperformer. German labor market and retail sales numbers are due for release this week along with consumer, economic and industrial confidence figures. The British Pound also ended the session almost unchanged against the U.S Dollar. Aside from the first quarter GDP report, no major economic data is expected from the U.K this week. After contracting in the fourth quarter, the economy is expected to return to growth in Q1. A month ago, the market was pricing in as much as 75bp of tightening by November and now only 25bp is expected by the end of the year. The reason why rate hike expectations have changed so much is because recent economic data has surprised to downside. The Japanese Yen has seen a lot of action over the past weeks, after what has dubbed the Great East Japan Earthquake shook the nation’s industry and economy. With a number of major releases due out next week, including a BoJ Press Conference, Retail Sales, CPI and others, the Yen is likely to see heavy trading

Time(GMT)	Economic Release	IM	Actual	Forecast	Prior
05:00	Japan Supermarket Sales YoY (MAR)	Low			0.6%
14:00	U.S New Home Sales (MAR)	Medium		280K	250K
14:30	U.S Dallas Fed Manufacturing Activity (APR)	Low		13.4	11.5

Euro

The Single Currency extended its gains in Friday’s trading session, although it remains lower than its 16- month high of 1.4650 reached on Thursday. A gauge of French manufacturing sentiment registered the highest reading since December 2007. EUR/JPY has stabilized after falling back from highs and is looking to retest 120 Yen in coming session for a resumption of the uptrend. Overall, the EUR/USD traded with a low of 1.4533 and a high of 1.4587 before closing the day around 1.4546 in the New York session.

Yen

The Japanese Yen remained at 82.00 Yen level for most of the day with little news. Over the weekend the BOJ Gov talked down the economy stating that the earthquake could push the economy back into recession and this could lead to Yen weakness on Monday. A recent report revealed that Japanese investors sold foreign equities at a record pace in the last week, suggesting a strong net-inflow of Yen may be materializing. Overall the USD/JPY traded with a low of 81.65 and a high of 82.09 before closing the day around 81.91 in the New York session.

British Pound

The British Pound consolidated in a tight range above 1.6500 with the market ready to press higher after breaking key resistance last week. EUR/GBP is still above 0.8800 and could fall back to 0.8500 if the British Pound Plays catch up in coming weeks. Three members of the monetary policy committee voted for tighter monetary policy earlier this month but this was the same way they voted in March which means that despite rising price pressures, the BoE has not grown more hawkish. Overall the GBP/USD traded with a low of 1.6502 and a high of 1.6568 before closing the day at 1.6514 in the New York session.

Canadian Dollar

The Canadian Dollar remained near its recent highs, after posting significant weekly gains. The key event risk for Canada will be GDP which is expected to remain flat but believed that it could increase slightly following rise in retail sales. Retail sales in February rebounded 0.4% $39.17 billion, Statistics Canada said. The market had expected a 0.5% gain. Sales volume also rose 0.4%. Overall, the USD/CAD traded with a low of 0.9519 and a high of 0.9545 before closing the day at 0.9542 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 55 and lies above the neutral zone. Overall, the cross has gained 0.04%.

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 53 reading and lies above the neutral zone. The pair has gained 0.03%.

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 59 reading and lies above the neutral region. The cross has gained 0.05%.

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 gained 0.02%.

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 43 and lies below the neutral region. The pair has lost 0.07%.

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