Sunday, March 22, 2009

12.1 More dollar weakness anticipated


EUR/USD; support: 1.3500, resistance: 1.4170.
GBP/USD; support: 1.4200, resistance: 1.4700.
USD/JPY; support: 95.00, resistance: 98.00
EUR/CHF: continue to look for buying opportunities ±1.51
EUR/GBP: look for buying opportunities after clear break out of 0.9500

Calendar notes:

Monday is fairly quiet with only US existing homes data (14:00) and Japan’s Monetary Policy Committee Meeting minutes (23:50) being of note.
Tuesday opens with the monthly raft of PMI data from the euro-zone (08:00-09:00). Mervyn King (Governor of the BoE) noted last week the importance of inflation in monetary policy decisions so the UK’s CPI (09:30) and the BoE’s quarterly inflation report (09:45) could well move the market. Tuesday is also alive with central bank speakers. Ben Bernanke (Chairman of the Fed) testifies to the house on AIG (14:00) along with US Treasury Secretary Tim Geithner. Later the same afternoon, Mervyn King steps up to testify to the UK’s House of Lords (15:30). Next, it’s the turn of Jean-Pierre Roth (Chairman of the SNB at 17:15), with the BoE’s Cassandra-turned-prophet, David Blanchflower, rounding the day off in Cardiff (18:30).
Wednesday lines up the influential German Ifo Business Climate Index (09:00), followed by US Durable Goods Orders (12:30) and more US housing numbers with New Home Sales (14:00).
Nationwide is due to release its UK Housing Price Index from Thursday (26 Mar-31 Mar), while UK Retail Sales (09:30) will give us the latest on the direction of the UK economy. Over the Atlantic we have US New Unemployment Claims and the final US GDP numbers (both at 12:30). Yen-watchers should listen out for Japan’s CPI (23:30) and Retail Sales (23:50).
Friday brings the UK’s Current Account and final GDP numbers (both at 09:30). This is followed some 30 minutes later by the euro-zone’s Industrial New Orders (10:00). In the run-up to the US open, we have US Personal Spending and Personal Income data (12:30) and the University of Michigan’s revised Consumer Sentiment (13:55) to set the tone of the session.

Last week’s action:

The euro started the week with a calm and steady strengthening against the greenback as investor confidence grew in the wake of the previous Saturday’s G20, followed by Fed chairman Ben Bernanke’s appearance on the CBS show 60 minutes on Sunday evening. Mr. Bernanke told the show he could see some ‘green shoots’ of recovery, and that the US should be able to rise out of recession sometime this year as long as the financial sector finds a sound footing. On Tuesday the euro got further support when key ZEW economic sentiment numbers came in better than expected and eur/usd continued to trade around 1.30. Better than expected US inflation numbers Wednesday lunchtime boosted the euro to test 1.31, but the atmosphere of calm was only really disturbed with the FOMC statement later the same day. Although the Fed held rates at less than 0.25% as widely expected, the announcement that they would be buying $300B of longer term Treasury bonds sent the stock market soaring and triggered violent moves in other markets. The euro jumped 400 pips immediately after the news to test 1.35 by the close of US trading. Thursday saw the unified currency power on to 1.37 against the greenback helped by better than expected US job numbers and manufacturing data. The euro retested 1.37 on Friday before correcting to close at 1.3581.

Monday’s feel-good factor saw sterling rise to 1.42 against the dollar. The pair fell to test support at 1.40 on Tuesday and then crashed down through this level to the week’s low of 1.3842 on the release of horrendous UK job numbers on Wednesday. However, the Fed’s aggressive quantitative easing saw the pound rise to 1.43 against the greenback. After testing support at 1.42 on Thursday, the European and US sessions took the pair up to the week’s high of 1.4595 with the Fed’s action still causing waves. Friday saw the pair retest resistance at a tad below 1.46 before closing the week at 1.4460.

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