Currency Pair Overview: dollar Mixed Ahead Of Tomorrow’s FOMC Meeting

Overall: The dollar closed Tuesday’s trade mixed as the market continues to move in risk aversion mode, which benefits the greenback, but a stronger than expected read in consumer confidence brought dollar sellers back to the market on reduced demand for safe havens. The swine flu scare that had markets jittery on Monday continues to play a role in financial market activity but on a reduced level. The U.S. Conference Board consumer confidence numbers came in higher than analysts’ expected at 39.2. this is a good sign for the overall economic picture as this may impact retail sales, CPI, durable goods and GDP in the future. The euro responded by moving higher, erasing 50% of Monday’s losses. On the day the dollar weakened against the euro, Swiss franc and Japanese yen, closed flat against the Canadian dollar and strengthened against the pound and Australian dollar. A busy U.S. economic calendar on Wednesday could produce some volatility as advance GDP numbers will be released and the FOMC statement at 14:15 EDT.

The Euro (Eur/Usd) The euro moved higher on Tuesday, gaining 100 pips and erasing earlier losses after the Conference Board’s consumer confidence numbers beat expectations leading to speculation that the U.S. economy may be finding a bottom in the current contraction phase and demand for safety decreased. The pair closed the day just below the 1.3150 level and moved back above the 50 day simple moving average. German preliminary CPI numbers came in slightly lower than expected at 0.0% but had little effect on the pair. Euro-zone money supply and consumer confidence data will be released tomorrow morning.

The Pound (Gbp/Usd) Cable traded in exactly the same fashion as it did on Monday, moving much lower overnight, but rebounding and closing the day lower by less than 20 pips. The pair has tried to push lower for 2 consecutive days but in both cases the 100 day simple moving average has provided strong support and prevented the pair from breaking below the 1.4500 level. On the day, the pair traded in a range of 170 pips. CBI realized sales crushed analyst’s expectations coming in a 3 after economists had forecast a -40 reading. There are no U.K. economic releases scheduled for Wednesday.

The Aussie (Aud/Usd) The aussie moved lower again on Tuesday as the currency market continued to trade in risk averse mode increased by speculation that the stress tests will highlight weakness in U.S. banks and the continuing swine flu outbreak leading traders to sell higher yielding assets. The pair did recover some pips lost overnight and closed the day lower by approximately 30 pips. There were no economic releases from Australia last night and none scheduled for tonight’s Asian session.

The Cad (Usd/Cad) The better than expected Conference Board’s consumer confidence numbers helped the Canadian dollar as the positive news, which may be an indication the economy may be on the mend, tempered the decline in the currency on fears that travel may be quelled between North American countries because of the swine flu outbreak. The pair pushed higher ahead of the economic release but retreated after. The pair closed the day lower by less than 20 pips. There were no economic releases from Canada today and there are none scheduled for tomorrow.

The Swissy (Usd/Chf) The swissy moved much lower on Tuesday erasing a lot of the gains captured on Monday. The pair lost 130 pips on the day and closed the day back below the 20, 50 and 100 day simple moving averages which had been broken to the upside yesterday. The Swiss consumption indicator rose in March for the first time in four months, gaining 0.10 points, increasing to 0.99. The Swiss KOF economic barometer will be released tomorrow morning and analysts’ are expecting a decrease to -1.89.

The Yen (Usd/Jpy) The yen continues to move lower in ‘fits and starts’ losing another 35 pips on Tuesday but closing well off the lows of the day. Again, the move lower was due to traders continuing to be risk averse, helped by speculation the U.S. governments’ stress tests will expose weakness in U.S. banks. The pair closed the day just below the 96.50 level but had tested the 95.60 level intra-day. There are no economic releases from Japan tonight and all Japanese financial markets are closed for a Bank Holiday.