FOREX TRADING

• USD: Higher, FOMC may sell assets, new home sales rise 26.9%, durable goods rise ex. transports
• JPY: Lower, widening yield differential, improving risk sentiment, concern about Japan’s debt
• EUR: Higher, Greece seeks to activate EU/ IMF aid, German IFO rose by more than forecast
• GBP: Lower, Q1 GDP comes in below expectation, BOE seen on hold
• CAD and AUD: AUD & CAD lower, dovish RBA comments, weaker Canadian inflation and retail sales

Overview

A report that Greece seeks to activate the EU/IMF aid package and a surge in the German IFO business sentiment index sparked a short covering rally in the EUR. The EU commission said that Greek aid will be as soon as possible. The cost of financing the Greek debt dropped after the announcement that Greece seeks aid. USD traded mainly higher versus the majors with GBP pressured by report of weaker than expected UK Q1 GDP, AUD pressured by dovish comments from RBA Governor Stevens and CAD pressured by report of weaker than expected Canadian inflation and retail sales. Lower Canadian inflation may ease BOC rate hike pressure. USD was also supported by a CNBC report which says that a growing bloc of the Fed board members favor selling of assets. The selling of assets by the Fed would signal the beginning of withdrawal of monetary stimulus. JPY traded to a two-week low versus the USD in reaction to strong US economic data and Thursday’s warning from Fitch that the Japanese sovereign debt rating is at risk of downgrade because of the rising Japanese budget deficit. US economic data was positive with durable goods posting solid gain ex. transportation and new home sales surged. Today’s US economic reports follow yesterday’s report of stronger than expected existing home sales and drop in jobless claims. These data fuel hope that the US recovery is gaining momentum. Focus turns to next week’s FOMC policy meeting with investors looking for confirmation that the Fed is seeking to start its exit strategy.

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• USD: Mixed, IMF warns rising sovereign debt levels pose biggest threat to the global economy
• JPY: Lower, BOJ says Japan to eventually escape deflation, stops short of endorsing an inflation target
• EUR: Lower, Greek/German 10 year bond spread widens to record level, Greek aid talks begin today
• GBP: Higher, labor market improves as jobs claimant count falls more than expected, BOE more upbeat
• CAD and AUD: AUD & CAD mixed, Australia’s leading index rises, BOC rate hike speculation

Overview

USD traded mixed with the EUR pressured by ongoing concern about the Greek fiscal debt, GBP supported by report that the UK labor market is improving, commodity currencies trade higher supported by rate hike speculation with AUD supported by report of sharp rise in Australia’s leading index and the JPY traded lower with downside limited by comments from BOJ deputy governor that Japan will eventually escape deflation. Greek/ German 10 year bond spread rose to a 12 year high fueling concern about the cost of financing the Greek debt. Greek aid talks begin today and are expected to last two weeks. The German opposition party has threatened to block the government’s approval of a fast track of Greek aid. The IMF says that sovereign debt levels pose the biggest threat to the global economy. Persistent EUR selling pressure limits USD downside versus the majors. Growth led currencies continue to outperform supported by optimism about the global recovery as the Bank of India hikes interest rates and the BOC signals rates may soon rise. Rising interest rates are seen as confirmation that the markets are returning to normal. No major US economic data was released in today’s trade. Investors will continue to monitor news concerning the Greek debt. Focus turns to Thursday’s release of US initial jobless claims and existing home sales. (more…)

• USD: Mixed, equity markets rebound on revived risk appetite, strong US earnings
• JPY: Lower, improving risk sentiment, dovish comments from BOJ Governor Shirakawa
• EUR: Lower, German ZEW business sentiment beats forecast, Weber says Greece may need €80bln in aid
• GBP: Higher, CPI rises more than forecast
• CAD and AUD: AUD & CAD higher, hawkish RBA minutes, BOC to lessen monetary stimulus

Overview

USD traded mixed to lower Tuesday pressured by a rebound in risk appetite as global equity markets trade higher supported by optimism about the global recovery. Optimism about the global recovery was sparked by strong earnings at Goldman and improving investor confidence in Germany. Forecast beating investor sentiment report from Germany and above forecast UK CPI sparked light demand for the EUR and GBP and improving risk sentiment. IMF talks with Greek officials are scheduled to begin Wednesday. EUR gains were limited by statement from the ECB’s Weber that Greece may need €80bln in aid and by selling of the EUR/CAD cross sparked by today’s BOC policy meeting. The BOC signals rates will soon begin to rise in Canada. AUD traded higher supported by hawkish RBA minutes and a 25 bps rate hike in India. The RBA minutes suggest interest rates may need to rise more. The rate hike by India’s central bank may increase pressure on the RBA hike rates. The BOC elects to hold rate policy steady and will begin to lessen monetary stimulus. CAD traded sharply higher as the BOC shifts to a more hawkish policy bias and raises growth estimates. JPY traded lower pressured by improving risk appetite and dovish comments from BOJ governor Shirakawa. No major US economic data was released in today’s trade. The Fed’s Evans says that the US recession is definitely over and risk of a double dip recession very small. Evan’s comments add to optimism about the global recovery. Risk sentiment is the dominant driver of FX trade.

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• USD: Higher, SEC may expand probe of Wall Street, fresh Greek debt worries, leading indicators rise
• JPY: Mixed, safe haven demand sparked by the Goldman probe and Greek debt worries, tracking stocks
• EUR: Lower, Greece/German ten year bond spread at record high
• CHF: Lower, SNB intervention threat dampens safe haven demand, re-linking to risk sentiment
• GBP: Lower, UK election polls suggest a deadlocked Parliament
• CAD and AUD: AUD & CAD lower, Yuan revaluation may delay RBA rate hikes, commodities lower

Overview

The USD traded higher Monday supported by a spike in risk aversion as global equity markets decline in reaction to report that the SEC is widening its probe of Wall Street. Greek fiscal troubles continued to pressure the EUR as the Greek/German ten year bond spreads widened to a record 468bps. GBP traded lower in reaction to the latest election polls which point to a possible hung parliament as the UK’s third largest party, the Liberal Democrats surge in popularity. Commodity currencies weakened in reaction to a drop in commodity prices as crude drops below $81 a barrel and the price of gold falls by more than 1%. AUD was pressured by speculation that if China elects to revalue the Yuan the RBA may delay future rate hikes. CAD was pressured by report of smaller than expected investment inflows last month and weaker crude. JPY initially traded higher supported by safe haven demand sparked by the Goldman probe and Greek debt worries. JPY turned lower as stocks rise in reaction to strong US leading indicators. US economic data was positive with leading economic indicators rising above forecast. USD pared early gains after the leading indicators release as equity markets stabilize. There was limited reaction to report that the IMF plans to raise its global growth forecast to 4%. Focus turns to the BOC policy meeting Tuesday. Risk sentiment is the dominant driver of FX trade.

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• USD: Higher, fresh Greek debt worries, improving US housing data, consumer confidence declines
• JPY: Higher, China tightening, Yuan revaluation speculation, Goldman default swap spreads widen
• EUR: Lower, Greece may soon tap EU IMF aid, Trichet says Greek bank troubles could worsen
• GBP: Lower, UK election uncertainty, polls suggest surge for the Liberal Democratic Party
• CAD and AUD: AUD & CAD lower, China tightening, Canada’s mfg. shipments weaker than expected

Overview

The USD and JPY traded higher supported by worries over the Greek fiscal crisis and in reaction to report that China is taking measures to curb growth and allow the Yuan to gradually appreciate. EUR traded lower pressured by report that Greek officials seek talks on the rescue plan and may soon tap EU/IMF aid. EUR was also pressured by a statement from ECB President Trichet that Greek bank troubles could worsen. China raised its down payment requirements and rates on some mortgages to cool off the housing market. A Chinese central bank adviser says that China has come to consensus on adjusting its exchange rate gradually. Asian equities traded lower and commodity currencies were pressured by the report of tightening by China. GBP continued to trade in a narrow range despite the latest UK election polls which indicate that support for the Liberal Democratic Party has surged and support for the Conservative party and Labor party has declined increasing the risk of a hung parliament. JPY traded higher supported by an uptick in risk aversion and Yuan revaluation speculation. JPY rallied despite by a statement from Japan’s ruling party that monetary easing and currency intervention are needed to weaken the JPY and combat deflation. JPY traded to the day’s highs in reaction to a sharp selloff in US equities sparked by report that the SEC has charged Goldman Sachs with fraud on subprime mortgages and credit default swaps rise. Financial stocks and risk related markets were hit by the Goldman news. Today’s US economic data was mixed as housing starts and building permits rose more than expected. US housing starts rose to the highest level since November 2008 and building permits hit a 17 month high. Consumer confidence came in weaker than expected declining to an 8 month low. The trade will continue to monitor news on the Greek debt, next week’s US economic data and BOC policy meeting Tuesday. (more…)

• USD: Higher, jobless claims unexpectedly rise, manufacturing sector improves
• JPY: Higher, industrial production revised higher, Reuters Tankan mfg. index highest since April 2008
• EUR: Lower, cost of funding Greek debt rises, skepticism about the viability of the Greek rescue package
• GBP: Higher, Conservatives expand their lead over Labor, consumer confidence drops
• CAD and AUD: AUD & CAD lower, accelerating Chinese growth may encourage China to hike rates

Overview

The USD traded higher Thursday supported by concern about Greek fiscal troubles and in reaction to strong economic data from China. EUR traded sharply lower pressured by widening of Greek bond spreads and in reaction to report that Greece may cancel its latest bond issue. GBP outperformed supported by the latest UK election polls which show the Conservatives have expanded their lead over Labor. GBP gains were limited by report of a sharp fall in UK consumer confidence. China reported a sharp acceleration in growth with Q1 GDP rising by 11.9%, retail sales up 18% industrial production rose by 18.1%. The acceleration of growth in China may prompt China to tighten monetary policy and revalue the Yuan. Commodity markets and equities traded lower pressured by the threat of a tightening of monetary policy in China. AUD and CAD traded lower tracking the decline in commodities and pressured by the Chinese rate hike speculation. JPY traded higher supported by gains in cross trade to the EUR and Yuan revaluation speculation. US economic data was mixed with jobless claims posting an unexpected sharp rise and the Empire Manufacturing survey improving by nine points. The Labor Department said the unexpected rise in jobless claims may reflect the impact of the Easter holiday. It may take a couple more weeks before seasonal factors are no longer impacting the jobless claims data and the trend becomes clearer. Industrial production came in below expectation and capacity utilization was a slightly above expectation. The Philly Fed survey posted a modest improvement. Focus turns to Friday’s release of US housing starts and Michigan consumer sentiment. (more…)

Euro 1.3590

Initial support at 1.3500 (Apr 9 high) followed by 1.3341 (Apr 9 low). Initial resistance is now located at 1.3741 (Mar 18 high) followed by 1.3819 (Mar 17 high)

Yen 93.20

Initial support is located at 92.76 (Mar 31 low) followed by 92.25 (0.382 of 88.14-94.79). Initial resistance is now at 93.77 (Apr 9 high) followed by 94.27 (Apr 7 High).

Pound 1.5370

Initial support at 1.5130 (Apr 6 low) followed by 1.5044 (Mar 31 low). Initial resistance is now at 1.5575 (Feb 23 high) followed by 1.5688 (Feb 18 low).

Australian Dollar 0.9255

Initial support at 0.9224 (Apr 8 low) followed by the 0.9166 (Apr 6 low). Initial resistance is now at 0.9388 (Apr 12 high) followed by 0.9406 (Nov 16 high).

Gold 1156

Initial support at 1143 (Apr 8 low) followed by 1132 (Apr 7 low). Initial resistance is now at 1169 (Dec 8 high) followed by 1183 (0.764 of 1126.56-1044.85).

Oil 84.20

Initial support at 83.80 (Intraday Support) followed by 82.50 (Intraday Support). Initial resistance is now at 85.00 (March high) followed by 86.00 (Intraday Resistance)

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The euro rallied against the dollar and other key currencies after a €45 billion aid plan for Greece calmed investor fear of a Greek default. The S&P 500 was up 2.11 to 1,196.48. The Dow Jones Industrial Average rose 8.62 to 11,005.97, its first close above 11,000 since September 2008. The yen fell versus the dollar. Bank of Japan policy makers Tadao Noda and Miyako Suda opposed bolstering a lending program last month because it could not be justified given Japan’s improving economic conditions, minutes of the March 16-17 BOJ policy meeting released today showed. Yuan appreciation speculation eased following a government report that China posted its first monthly trade deficit since 2004. Sterling pared gains on renewed worries of a hung UK parliament. Unable to penetrate the important 0.94-area resistance, the Australian dollar reversed earlier gains on a deeper-than-expected decrease in Australian home-loan approvals. Hovering around parity for a sixth straight day, the Canadian dollar slipped as Canada’s housing starts unexpectedly declined. (more…)