Daily Outlook - Japan Quake Nuclear Radiation Threat

By @ibtimes on

Last week's currency trading review

The Dollar was very strong against most pairs this week as the Japanese Earthquake/Tsunami caused widespread risk aversion and stock market liquidations. The crisis escalated on Tuesday with news of radiation leaking and high reading in Tokyo spooking markets into a 10% drop in the Nikkei. Wild volatility then dominated as oversold conditions inspired bargain hunting which prompted periods of short covering but traders are still very nervous. The FOMC met and held rates at 0.25% helping markets rally as they continue with their very loose monetary policy. The Euro was able to hold its own against the Dollar after the Euro group meeting over the weekend resulted in a new pact to expand the bailout package and the range of measure the ECB can use to support fragile debt markets. German March ZEW showed a drop of business sentiment to 1.41 vs. 15.7 previously. The EUR/USD is up +0.17% currently at 1.3925, after opening the week at 1.3901.

The Japanese Yen was the most active currency in the market as the massive earthquake caused Japanese investors to pull back money from around the world and send the Yen higher against all currencies. AUD/JPY was down 10% at one stage as the carry trade was unwound. Concerns about the radiation leak near Tokyo is causing the most volatility with the chances of a full meltdown still high. The USD/JPY is down -3.57% currently at 79.02, after opening at 81.87. The GBP was lower but still not heavily as of Thursday with support at 1.6000 holding on 3 days, EUR/GBP is taking advantage though and headed past 0.8700. January Unemployment Rate increased to 8.0% vs. 7.9% previously. The GBP/USD is down -0.45% currently at 1.6007 after opening at 1.6079. The AUD was under heavy selling pressure as stock markets crashed around the world and the risk sensitive currency followed them lower. 1.0000 was broken early in the week and the market has traded as low as 0.9700 at the height of the panic. The outlook will be closely linked with the stock market but the chances of further sharp selling are still high. The RBA is currently on a neutral footing and will likely remain so while the worlds recovery is threatened by both high oil and the Japanese crisis. The AUD/USD is down -3.39% currently at 0.9805 after opening at 1.0137.

The Forex Trading Economic Data Ahead Preview

In the States; On Thursday, February CPI is forecast at 0.5% vs. 0.4% previously. Also released, Weekly Jobless Claims are forecast at 388k vs. 397k previously. On Monday, February Existing Home Sale previously at 5.36mn. On Wednesday, February New homes Sales previously at 284k. On Friday next week we have Final GDP originally at 2.8% and Revised March Consumer Sentiment previously at 68.2.  We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; On Thursday, Manufacturing PMI previously at 59.0 and Services PMI and previously at 56.8. On Friday, March German IFO Business Climate previously at 111.2. In the UK, On Tuesday, February CPI previously at 4.0%. On Wednesday, March MPC Minutes released. On Thursday, February Retail Sales previously at 1.9% m/m. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; Ongoing news coverage of the Japanese Nuclear accident will dominate the market moves. In Australia; On Thursday, RBA Financial Stability Review. We will provide our previews and reviews of these data releases in the daily summary.

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.3705

1.3855

1.3895

1.4013

1.4086

USD/JPY

75.00

76.70

79.65

80.00

81.17

GBP/USD

1.5845

1.5962

1.5990

1.6185

1.6344

AUD/USD

0.9625

0.9753

0.9800

1.0000

1.0256

XAU/USD

1360.00

1381

1391

1429

1444

OIL/USD

96.50

97.00

97.65

98.50

100.00

Euro - 1.3895

Initial support at 1.3855 (Mar 15 low) followed by 1.3705 (Feb 24 low). Initial resistance is now located at 1.4013 (Mar 15 high) followed by 1.4086 (Nov 8 high)

Yen - 79.65

Initial support is located at 76.70 (Mar 16 low) followed by 75.00 (Big Figure Support). Initial resistance is now at 80.00 (Big Figure Resistance) followed by 81.17 (Mar 16 High).

Pound - 1.5990

Initial support at 1.5962 (38.2% retrace of 1.5345-1.6344) followed by 1.5845 (50% retrace of 1.5345-1.6344). Initial resistance is now at 1.6185 (March 15 low) followed by 1.6344 (Mar 2 high).

Australian Dollar - 0.9800

Initial support at 0.9753 (Dec 8 low) followed by the 0.9625 (Dec 2 low). Initial resistance is now at 1.0000 (Parity) followed by 1.0202 (Mar 1 high).

Gold - 1391

Initial support at 1381 (Mar 15) followed by 1360 (61.8% retrace of 1308.25-1444.95). Initial resistance is now at 1429 (Mar 15 high) followed by 1458 (1410.32 plus 1392.65-1440.32).

Oil - 97.65

Initial support at 97.00 (Intraday Support) followed by 96.50 (Intraday Support). Initial resistance is now at 98.50 (Big figure resistance) followed by 100.00 (intraday resistance).

Written by Anthony Darvall

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