Markets fatigued over Greek aid indecision!

•  Trading yesterday saw some USD and JPY strength across the board as risk aversion fueled the markets. Greek 10 year bonds over German Bunds traded near 500bp as the indecision in regards to activating the bailout package has got the markets fatigued and unwilling to go long risk via the EUR at the moment. The Greek Prime Minister said yesterday that the government will decide soon about triggering the mechanism however that does not mean that Greece will stop raising funds from the capital markets. From the financial calendar we did not have any major announcements with focus turning to today’s PMI Manufacturing and Services Trichet will also be speaking today and thought to be a risk event. EURUSD traded between 1.3445 – 1.3356.
•  In the US yesterday we had no major economic announcements other than Ben Bernanke testifying before the financial services committee on the collapse of Lehman Brothers. We also had very positive earnings from the banking sector yesterday with banks such as Wells Fargo and JP Morgan beating analysts’ estimates and posting earnings of $2.37 bln and $3.3 bln respectively. Stock markets closed flat yesterday with markets puzzled over the situation in Europe.
•  In the UK yesterday we had BoE minutes indicating a 9-0 decision to keep the asset purchase facility on hold at GBP200bln. However despite the dovish BoE the latest strong CPI data are keeping the GBP supported and making weekly highs at 1.5457.
•  Today the market will be anticipating from the US a number of market moving reports including jobless claims, PPI and existing home sales all expected to show growth further instilling confidence in a US broad based recovery.

 Currency to watch out for: EURUSD & USDJPY

• § The EURUSD pivot point is at 1.3355 with a preference to enter into Long positions at 1.3375
• § The USDJPY pivot point is at 93.20 with a preference to enter Short positions at 93.15

 Today’s calendar and market movers:

• § EU PMI Manufacturing for April expected at 56.8
• § EU MPI Services for April expected at 54.4
• § US Jobless continuous claims for the week expected at 4.6 mln.
• § US Existing Home Sales for March expected at 5.28 mln

 Equity Markets:

•  US equities closed positive on flat yesterday with the DJIA and the SP500 closing 0.07% and -0.1% respectively.  The European bourses were down yesterday with the FTSE closing -1.04% the DAX and the CAC closing down at -0.54% and -1.22%. The NIKKEI and the HSI at the time of writing is -1.27% and -0.68% respectively.

Markets fatigued over Greek aid indecision!

•  Trading yesterday saw some USD and JPY strength across the board as risk aversion fueled the markets. Greek 10 year bonds over German Bunds traded near 500bp as the indecision in regards to activating the bailout package has got the markets fatigued and unwilling to go long risk via the EUR at the moment. The Greek Prime Minister said yesterday that the government will decide soon about triggering the mechanism however that does not mean that Greece will stop raising funds from the capital markets. From the financial calendar we did not have any major announcements with focus turning to today’s PMI Manufacturing and Services Trichet will also be speaking today and thought to be a risk event. EURUSD traded between 1.3445 – 1.3356.
•  In the US yesterday we had no major economic announcements other than Ben Bernanke testifying before the financial services committee on the collapse of Lehman Brothers. We also had very positive earnings from the banking sector yesterday with banks such as Wells Fargo and JP Morgan beating analysts’ estimates and posting earnings of $2.37 bln and $3.3 bln respectively. Stock markets closed flat yesterday with markets puzzled over the situation in Europe.
•  In the UK yesterday we had BoE minutes indicating a 9-0 decision to keep the asset purchase facility on hold at GBP200bln. However despite the dovish BoE the latest strong CPI data are keeping the GBP supported and making weekly highs at 1.5457.
•  Today the market will be anticipating from the US a number of market moving reports including jobless claims, PPI and existing home sales all expected to show growth further instilling confidence in a US broad based recovery.

 Currency to watch out for: EURUSD & USDJPY

• § The EURUSD pivot point is at 1.3355 with a preference to enter into Long positions at 1.3375
• § The USDJPY pivot point is at 93.20 with a preference to enter Short positions at 93.15

 Today’s calendar and market movers:

• § EU PMI Manufacturing for April expected at 56.8
• § EU MPI Services for April expected at 54.4
• § US Jobless continuous claims for the week expected at 4.6 mln.
• § US Existing Home Sales for March expected at 5.28 mln

 Equity Markets:

•  US equities closed positive on flat yesterday with the DJIA and the SP500 closing 0.07% and -0.1% respectively.  The European bourses were down yesterday with the FTSE closing -1.04% the DAX and the CAC closing down at -0.54% and -1.22%. The NIKKEI and the HSI at the time of writing is -1.27% and -0.68% respectively.

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Last week’s currency trading review

The Dollar started the week on a strong footing after the strong Non Farm Payrolls data and was able to keep this strong footing for most of the week as the market focused on Greece’s woes. Pending Home Sales jumped 8.0% in a positive sign for US housing and the FOMC minutes were slightly dovish allowing the stock market another week of gains. The Euro tested March lows under 1.3300 before receiving a boost on Friday as speculation mounted the EU would do something over the weekend to stabilize the Greece situation. The ECB held at 1.0% as forecast and ECB president Trichet was relatively upbeat on the recovery. The EUR/USD lost 0.04% closing at 1.3497, after opening the week at 1.340.

The Japanese Yen enjoyed some of the benefit of heavy EUR/JPY selling on the Greece issue as the heavily sold off Yen was bought back across the board. USD/JPY slipped back to 92.80 after opening above Y94.50 on Monday. The BOJ met and held at 0.1% and stated that although the economy was recovering it was not currently self sustaining. The USD/JPY fell -1.53% closing at 94.61, after opening at 92.49 previously. The GBP broke above resistance at 1.5320 to finish the week on the front foot as the market responded to improving economic data and a more neutral BOE. The Bank of England held at 0.5% and kept the Asset Purchase program at 200bn with most analysts thinking the bank will wait for after the elections before revealing their hand. GBP/USD gained +1.09% closing at 1.5374 after opening at 1.5207. The AUD pushed above 0.9300 on Friday as Gold extended its gains to above $1160. Gains were underpinned by a RBA rate hike to 4.25% on Tuesday and solid Unemployment numbers with a gain of 20k in March. AUD/NZD continued to push above 1.3000 but further gains are in question. The AUD/USD gained +1.55% closing at 0.9335 after opening at 0.9190.

The forex trading week preview

In the States; On Tuesday, Feb Trade Balance is forecast at -39bn vs. -37.3bn previously. On Wednesday, March Retail Sales are forecast at 1.1% vs. 0.3% previously. Also released, March CPI is forecast at 2.4% vs. 2.1% previously. On Thursday, Weekly Jobless claims are forecast at 440k vs, 460k previously. Also released, March Industrial Production forecast at 0.7% vs. 0.1% previously. On Friday, March Housing Starts are forecast at 6.1% vs. -5.9% previously. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; On Tuesday, Greece Debt Auction. On Wednesday, February Industrial Production is forecast at 0.3% vs. 1.7% previously. On Friday, March CPI is forecast at 1.5% vs. 0.9% y/y. In the UK; On Tuesday, February Trade Balance forecast at -7.2bn vs. -7.9bn previously. On Wednesday, March Nationwide Consumer Confidence is forecast at 81 vs. 80 previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; On Thursday, February Industrial Production previously at -0.9%. In Australia; On Wednesday, Westpac Consumer Confidence. We will provide our previews and reviews of these data releases in the daily summary.

TECHNICAL COMMENTARY

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).

Last week’s currency trading review

The Dollar started the week on a strong footing after the strong Non Farm Payrolls data and was able to keep this strong footing for most of the week as the market focused on Greece’s woes. Pending Home Sales jumped 8.0% in a positive sign for US housing and the FOMC minutes were slightly dovish allowing the stock market another week of gains. The Euro tested March lows under 1.3300 before receiving a boost on Friday as speculation mounted the EU would do something over the weekend to stabilize the Greece situation. The ECB held at 1.0% as forecast and ECB president Trichet was relatively upbeat on the recovery. The EUR/USD lost 0.04% closing at 1.3497, after opening the week at 1.340.

The Japanese Yen enjoyed some of the benefit of heavy EUR/JPY selling on the Greece issue as the heavily sold off Yen was bought back across the board. USD/JPY slipped back to 92.80 after opening above Y94.50 on Monday. The BOJ met and held at 0.1% and stated that although the economy was recovering it was not currently self sustaining. The USD/JPY fell -1.53% closing at 94.61, after opening at 92.49 previously. The GBP broke above resistance at 1.5320 to finish the week on the front foot as the market responded to improving economic data and a more neutral BOE. The Bank of England held at 0.5% and kept the Asset Purchase program at 200bn with most analysts thinking the bank will wait for after the elections before revealing their hand. GBP/USD gained +1.09% closing at 1.5374 after opening at 1.5207. The AUD pushed above 0.9300 on Friday as Gold extended its gains to above $1160. Gains were underpinned by a RBA rate hike to 4.25% on Tuesday and solid Unemployment numbers with a gain of 20k in March. AUD/NZD continued to push above 1.3000 but further gains are in question. The AUD/USD gained +1.55% closing at 0.9335 after opening at 0.9190.

The forex trading week preview

In the States; On Tuesday, Feb Trade Balance is forecast at -39bn vs. -37.3bn previously. On Wednesday, March Retail Sales are forecast at 1.1% vs. 0.3% previously. Also released, March CPI is forecast at 2.4% vs. 2.1% previously. On Thursday, Weekly Jobless claims are forecast at 440k vs, 460k previously. Also released, March Industrial Production forecast at 0.7% vs. 0.1% previously. On Friday, March Housing Starts are forecast at 6.1% vs. -5.9% previously. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; On Tuesday, Greece Debt Auction. On Wednesday, February Industrial Production is forecast at 0.3% vs. 1.7% previously. On Friday, March CPI is forecast at 1.5% vs. 0.9% y/y. In the UK; On Tuesday, February Trade Balance forecast at -7.2bn vs. -7.9bn previously. On Wednesday, March Nationwide Consumer Confidence is forecast at 81 vs. 80 previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; On Thursday, February Industrial Production previously at -0.9%. In Australia; On Wednesday, Westpac Consumer Confidence. We will provide our previews and reviews of these data releases in the daily summary.

TECHNICAL COMMENTARY

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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FX Highlights

• The USD is trading higher with the EUR pressured by Greek debt troubles as the Greek/German 10 year bond spread widens to a record level, the ECB leaves interest rate policy unchanged as expected, GBP outperforms supported by report of better than expected UK industrial production and manufacturing output and rising UK house price data, GBP gains limited by the latest UK election polls which show the Conservative party’s lead ahead of the May 6th election has narrowed increasing the risk of a hung parliament, the BOE leaves interest rate policy and asset purchase plan unchanged as expected, commodity currencies trade lower tracking weaker commodity prices and declining equity markets, AUD downside was limited by report of improving Australian employment growth, JPY trades higher in reaction to report that China plans to announce a change in its Yuan policy and by rising risk aversion as equity markets drop
• Focus turns to today’s release of US initial jobless claims and the ECB press conference
• PBOC official calls for managed float for the Yuan, New York Times reports that China is close to shift in its currency policy
• Japan’s February core machinery orders fall by 5.4%, February current account surplus narrows to ¥1.47trln,JPY higher
• Australia’s March unemployment rate at 5.3%, employment growth at 19.6k,AUD lower
• BOE elects to hold monetary policy and asset purchases unchanged, UK February manufacturing output rose by 1.3% and industrial output rose by 1%, Halifax house price index rose by 1.1%,GBP lower
• EU February retail sales fall by 0.6%, Greek/ German 10 year bond yields widened to a record level, EUR lower
• Swiss March jobless rate falls to 4.2% from 4.4%,CHF lower
• Former Fed Chairman Volcker says the US should consider raising taxes and adopt a vat tax to help bring the deficit under control
• Fed Chairman Bernanke urges the US to commit to fiscal responsibility and he warned that failure to commit to fiscal responsibility will in the long run lead to financial instability and weaker growth, he warned that unemployment and foreclosures present challenges to the recovery
• Fed’s Hoenig says forces for sustained recovery are moving into place, he expects 3% GDP growth in 2010, labor market weak but stabilizing, inflation likely to remain low for the next two years, extended period language no longer warranted
• Business Roundtable says 29% of CEO’s plan to add to payrolls in the next six months, 21% say their payrolls will shrink and 50% expect no change, this is the first rime since Q1 2008 that more CEO’s have expected to add jobs than cut
• Consumer credit fell by 11.5bln in February, a 0.7bln decline was expected
• US equity markets set to open lower, European equities 1.5% lower, Nikkei closed 124 points lower

Upcoming Events

• US- Thursday, initial jobless claims for week ending 04/03 will be released expected at 435k compared to 439k last week
• CAN-Thursday, no major economic data is due for release Canada today