Forex Investment and Currency Trading

There had been a correlation between movements in EUR/USD and the price of crude oil, although the dynamics driving that relationship appear to have shifted. Over the last 6-12 months it appears an asymmetric response function among major central banks to movements in oil prices that may have contributed to the correlation between EUR/USD and the oil price. Given rising headline inflation in the Euro zone and the ECB’s sole mandate of inflation control, rising oil prices were viewed as an upside risk to inflation. For the Fed and its dual mandate, however, rising oil prices marked an upside inflation [...]

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The 2nd most reliable indicator of US employment, the initial jobless claims (its a hard number, not an estimate and not seasonally adjusted..( the most reliable numbers come from payroll tax data))  jolted higher to 407,000 from 366,000 for the past several weeks.  Continuing claims also deteriorated to 2.93 mm from 2.84 mm. 
 
On the positive side ISM (services) is holding up at 49.6 in March vs 49.3 last month.
 
 GBP  - BNP once again cannibalising the Eurgbp market, talk is that its related to the Heineken M&A deal. This is lending cable support in what has been a see saw few [...]

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1 – 3 Month Outlook – retest highs
EUR/USD spiked to a new all time high of 1.5904 in mid-March. Unusually, by recent standards, much of the move represented independent EUR direction, rather than EUR gaining by default as USD sold off across the board. In markets that were generally dominated by rising risk aversion, usually a fairly neutral EUR environment, EUR matched the gains seen by CHF and JPY. EUR’s gains largely reflect diminishing expectations for ECB rate cuts. At the trough of rate expectations in mid-February, EURIBOR futures fully discounted three 25bp ECB rate cuts. Currently, futures discount one [...]

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Overall: Some signs of better USD performance yesterday as yields and Equities headed higher.Up move in yields still bears watching while the Equity markets are approaching good resistance levels. the bias is retained that the corrective move lower in commodities has not yet run its course.
Equities: Important resistance is now close by on U.S. markets. Elsewhere the Sensex remains under pressure
FX: EURUSD holds short-term support although bias remained for lower levels. GBPCHF and G10CHF bounce off the 76.4% pullback level. USDJPY breaks back through the major pivots.
Fixed Income: U.S. 2-year yield testing major resistance. Could this be a pivotal week [...]

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