Forex News and Events:
Risk aversion continues to show its cunning little head as we approach the preliminary releases of information regarding the stress test of the US' 19 largest banks. The government will begin debriefing the banks on their performance and informing the public on the methods used before the results are published on May the 4th. The particularity of these releases will be that the government must tread very lightly and measure its words so as not to exacerbate the delicate and frail state of the economy – this of course if the tests aren't encouraging.
The interesting developments in the last couple of sessions have been that the dollar's haven status has waned somewhat – to profit the Swissy, Euro and Yen especially. This comes at a time when general sentiment is that the global economy is nearing a bottom – yes we may have some ways to go before we see that bottom but all signs point to a slowing of the rate of deterioration of the recession. As focus shifts from inflation to deflation governments are starting to look at how to steer out of the recession. The EUR traded higher against the Greenback to a high of 1.3239 – up from a low of 1.2980 yesterday. USDCHF hit all our previous day's stops, trading as low as 1.1424 at time of writing. The U.S Automakers are also in the headlines as both Chrysler and GM battle to keep afloat.
The U.S Treasury has given Chrysler until April 30th to seal a deal with Fiat Spa to qualify for a further $6Bn in government aid bringing the total aid from the taxpayer to $10Bn. GM has been given a similar deadline – if not met both Auto-giants will be forced to file for bankruptcy – rumors have it that the filing has already gotten underway.
The impressive volatility in Gold recently has seen the commodity trade from a low of $865/oz to $913/oz this morning. Reports that China has been steadily increasing its Gold reserves (up 76% since 2003) culminating at 1'054 tons of the precious metal – putting it on par with Switzerland's legendary gold reserves of 1'040 tons. China has the worlds largest currency reserves – estimated at $1.95Trn (as of March 31st) and now a fifth of the world's gold reserves. This said analysts don't see a paradigm shift in China's reserve policy simply its intent on being a major player on a global scale. Chinese Premier Wen Jiabao has expressed concern over the Dollar's recent decline eroding the value of China's holdings of U.S treasuries – China being the largest owner of overseas U.S debt. This allows us to think that a strong dollar view continues to be the way forward for now.
Today's Key Issues (time in GMT):
12:30 USD Durable goods orders (MAR) -1.5% Vs 3.4%
12:30 USD Durables Ex Transportation (MAR) -1.3% Vs 3.9%
14:00 USD New home sales 337K vs 337K
20:30 USD Treasury Secretary Geithner Holds news conference.
The Risk Today:
EurUsd Previous resistance becomes initial support (1.3201 – 23.6% fib level) as the dollar strength wanes. Strong support at today's high of 1.3273 however a strong move above this would focus 1.3424 – which is a crucial level at which the pair would break from the current broad bearish trend mentioned numerous times. We see the pair consolidating its moves today and resume a strong dollar rally in the event of favorable stress test echoes.
GbpUsd Sterling weakness resumes even as the dollar drops against other majors, strong resistance at 1.4747 (previous day high) however bias is lower, initial support at 1.4595 which will then lead the way for a pre-weekend target of 1.4512 via 1.4559.
UsdJpy Strong Yen continues to defy the dollar – now compounded by dollar weakness – we see support at 96.15 (38.20% retracement on move from 110.88 to 87.05). Initial resistance at 97.21 with daily target at 97.56.
UsdChf Swiss currency regains haven status – even if it's momentary – strong Credit Suisse numbers comfort markets – CHF gaining 2.5% on the dollar since yesterday's highs of 1.1674. Initial support at 1.1382, with near-term target at 1.1302.
Resistance and Support:
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot|