FOREX Newsletter
Pulse of the Market
· Combination of dovish ECB and crashing commodities helped the U.S Dollar surge in a major reversal
· The Single Currency collapsed as the ECB’s neutral stance pull rate expectations back to earth
· British Pound Advanced against Euro and Australian Dollar as the BoE maintains its bearings
· Canadian bulls looking for strong employment data to support a rebound in risk appetite
The U.S Dollar gained against most of its major counterparts in yesterday’s trading session for the first time in nearly a week. The greenback appreciated the most against the higher yielding European currency as investors fear that global economic growth may be slowing. Equities and commodities continued to decline as investors sought the safety of the Dollar and other "safe haven" currencies like the Japanese Yen. A weak labor report in the U.S has compounded these fears with jobless claims surging to 474K, the worst reading in nearly a year. While some of the gain can be attributed to extraordinary events, such as auto plants temporarily shut in the wake of the natural disasters in Japan. One of the Fed's primary aims with the QE programs is to encourage maximum employment. With persistent weakness in the labor market, this becomes worrisome and will likely cause the Fed to refrain from raising interest rates for the anticipated future. While not gaining on positive news or an encouraging outlook, the Dollar will remain well supported as it benefits from the renewed wave of risk aversion. The Euro dropped by nearly 1.5% against the U.S Dollar yesterday as investors pared their bets that the ECB will raise interest rates in June. ECB President Jean-Claude Trichet told reporters that inflation risks will be watched "very closely", avoiding the use of his recent catch phrase "strong vigilance." As expected, the ECB left rates on hold at 1.25% after last month's 0.25% increase. Beyond reduced expectations of imminent ECB rate hikes, the Euro has come under pressure as investors seek safer investments with both global equities and commodities. Cable also traded lower yesterday after the BoE left interest rates on hold. The British Pound initially hit a 13 month low against the Euro until the ECB left rates unchanged. However, after months of weak economic growth, most see the BoE as justified in keeping rates at an historic low despite persistently high inflation. The Japanese Yen rose to a six week high yesterday, breaching the important 80.00 barrier for the first time since the G7 central banks intervened following March's devastating earthquake and tsunami. The appreciation has been accentuated by thin liquidity in the Asian markets with Japan markets closed for public holidays.
Time(GMT) | Economic Release | IM | Actual | Forecast | Prior |
05:45 | Switzerland Unemployment Rate (APR) | Medium | 3.3% | 3.4% | |
06:45 | France Trade Balance (Euros) (MAR) | Low | -6500M | -6553M | |
10:00 | German Industrial Production n.s.a. and w.d.a. (YoY) (MAR) | Medium | 10.3% | 14.8% | |
11:00 | Canada Net Change in Employment (APR) | High | 20.0K | -1.5K | |
12:30 | U.S Change in Non-farm Payrolls (APR) | High | 185K | 216K | |
12:30 | U.S Change in Private Payrolls (APR) | Medium | 200K | 230K | |
19:00 | U.S Consumer Credit (MAR) | Medium | $5.000B | $7.617B |
Euro
The Single Currency instantly fell through 1.4700 when the European Central Bank left out the term 'vigilance' and the pair continued to slump towards 1.4500 as stocks/commodities selling adding to the downside pressure. The ECB held at 1.25% as forecast but the market now doesn't see a rate hike in June as a possibility. Overall, the EUR/USD traded with a low of 1.4509 and a high of 1.4898 before closing the day around 1.4541 in the New York session.
Yen
The Japanese Yen traded higher yesterday following risk aversion and weak U.S data which made Japanese Yen the safe haven choice with investors pushing the USD/JPY through 80.00 Yen briefly before buyers emerged. Bargain hunters on the Crosses especially the AUD/JPY came out after the most pairs have fallen significantly in last 4 days. Overall, the USD/JPY traded with a low of 79.55 and a high of 80.68 before closing the day around 80.05 in the New York session.
British Pound
The British Pound sold off with the rest of the market but was able to take advantage of the Euro slump to push EUR/GBP from fresh month highs nearly 2 big figures lower. The BOE held at 0.5% as expected but did not release a statement. Overall, the GBP/USD traded with a low of 1.6357 and a high of 1.6542 before closing the day at 1.6391 in the New York session.
Canadian Dollar
The Canadian Dollar tumbled as investors pared their bets that global economic growth is accelerating. Crude dumped by more than $7. The Loonie touched its weakest levels in a month on the lower price of oil, Canada's primary export and an awful jobs report out of the US, Canada's largest trading partner. Overall, the USD/CAD traded with a low of 0.9503 and a high of 0.9602 before closing the day at 0.9588 in the New York session.
Australian Dollar
The Australian Dollar was crushed lower with all fleeing for the exits with the 10% drops in Oil and sharp drops in Gold and Silver leaving commodity currency battered. Support was found at 1.0600 and if stocks can turn around then bargain hunters may emerge. Overall, the AUD/USD traded with a low of 1.0535 and a high of 1.0770 before closing the day at 1.0579 in the New York session.
Euro-Yen
EUR/JPY is trading below 14, 50 and above 100 days moving average. Fast stochastic is giving a bearish tone and MACD is also issuing a bearish stance. The RSI is above 41 and lies below the neutral zone. Overall, the cross has lost 2.59%.
Sterling-Yen
Currently GBP/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing bearish and MACD is also indicating a bearish stance. The RSI is above 38 reading and lies below the neutral zone. The pair has lost 1.26%.
Aussie-Yen
Currently, the cross is trading below 14, 50 and above 100 days moving average. Fast stochastic gives bearish and MACD is also indicating a bearish stance. The RSI is above 45 reading and lies below the neutral region. The pair has lost 2.21%.
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 53 reading and lies above the neutral region. The pair has lost 1.37%.
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 35 and lies below the neutral region. The pair has gained 0.39%.
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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