Forex Investment and Currency Trading

FX Update
Consumer Credit (Survey: $6.0bn)

Upcoming Data: Pending Home Sales, Minutes of March 18 FOMC

USD
The past week’s FX movements resulted in a fairly stable and rangebound USD. The dollar gained versus both JPY and CHF, but remained little changed against EUR, GBP, and AUD. The bias is for further USD weakness in the near term. Diverging rate paths should continue to drive USD lower, mainly versus the euro whose fundamental prospects remain solid in contrast to the dollar. The G-7 meeting on the 11th should be a major focus for the FX markets this week. While the odds are low that any substantial new policy with regards to FX will be introduced, the communiqué is expected to reference greater CNY flexibility and concerns regarding excessive EUR gains.

EUR/USD

After falling through European trading hours, the euro has consolidated back around the 1.57 level. A major focus for the euro this week will be the ECB’s meeting (4/10). The central bank is expected to maintain rates at their current levels, with the major focus shifting towards the policy statement. Long the euro through the meeting, and expect EUR/USD to trend higher on the basis of diverging interest rate differentials and the euro-area’s continued focus on slowing inflation.

Short term technical studies show support levels at 1.5350 and a resistance level at 1.5730.  

 
Upcoming Data: Euro-zone GDP

GBP/USD

GBP/USD has dropped slightly over the weekend ahead of this week’s BoE meeting (4/10). Market is looking for a 25bps rate cut with the focus falling on the accompanying statement. If the BoE provides a clearer indication of future rate movements, the pound will likely be a major mover. While there are genuine concerns regarding inflation in the area, the rhetoric is likely to take a dovish turn lending to additional GBP weakness.

Short term technical studies show support levels at 1.9750 and a resistance level at 2.0000.  

 
Upcoming Data: Consumer Confidence

USD/JPY

The yen fell the most against the dollar in over a week as global equity gains encouraged yen funded carry trading. Asian equities reached a five-week high and became the major driver of funding currency weakness over the weekend. If the FOMC minutes this week indicate that the US could be at the end of the rate-cutting cycle, USD/JPY should continue its climb higher.

Short term technical studies show support levels at 101.00 and a resistance level at 103.50.  

 
Upcoming Data: BOJ Policy Meeting

AUD/USD

AUD has continued to rally this morning alongside equity markets in the Europe and Asia. However, focus for the high-yielding G-10, like AUD, has shifted more squarely towards rate differentials versus the US and commodities. As the RBA takes on a less hawkish tone domestic data will becoming increasingly important for the Australian dollar.  

Short term technical studies show support levels at 0.9145 and a resistance level at 0.9290.

 
NZD/USD

NZD is trading significantly higher this morning. The recent fall in business confidence and the deterioration in the housing market puts next weeks NZIER business survey and the PMI in focus as the market turns it focus towards domestic data releases.  There are concerns remained about NZD especially as it appears high compared to its historical relationship with rates, commodities, and equities.

Short term technical studies show support levels at 0.7800/7785 and a resistance level at 0.7995.

 
USD/CAD

CAD strengthened through trading last week, falling into a range after the downside surprise with non-farm payrolls out of the US. As rate expectations in the US continue to fall and commodity prices tick higher again  the Canadian dollar is expected to strengthen further.

Short term technical studies show support levels at 0.9980 and a resistance level at 1.0130.
Commodities Update
Commodity prices have stabilized and are trading higher again this morning. Crude has made a solid rebound grind higher from $104/barrel towards the end of last week to above $107/barrel this morning Gold too has staged a recovery trading back through the widely watched $900/oz level as concerns about USD weakness persists.