• U.S. Dollar Trading (USD) weakened yesterday as hawkish comments coming from the Euro Zone pushed the Euro to a record high of 1.6018 against the greenback. Traders are now adding to bets the next move by the ECB will be to hike rates in reaction to continual inflationary concerns, which may see the dollar weaken even more in the short term. On Tuesday U.S Existing Home Sales for the month of March fell another -2% to 4.93 million, inline with expectations of 4.93 million, this figure was slightly down from 5.03 million in February. In share market news airline stocks fell as surging oil prices cut into profits, dampening investor sentiment. The Dow Jones fell by 104 points (-0.8%), whilst the NASDAQ lost 31 points (-1.3%). Oil prices again reached new highs as Nigerian oil supply concerns remain. Prices rose US$1.89 a barrel to US$119.37.
• The Euro (EURO) broke through $1.60 for the very first time as ECB officials voiced their continual concerns over inflation which led investors on a buying frenzy to crack through the psychological barrier which had been tested on a couple of occasions throughout the last week but had found resistance. ECB official Noyer stated that if inflation doesn’t slow next year, the ECB will move rates if needed. Mersch went on to say that its getting likely the ECB will have to adjust the inflation projection upward in June, despite the slowing growth in the region and continued financial market turmoil. The EURUSD traded at a low of 1.5836 and a high of 1.6018, before closing at 1.5997 in New York. Looking ahead, German PMI Services and PMI Manufacturing for April are announced on Wednesday with little change forecasted from March’s figures of 51.8 and 55.1 respectively. Euro PMI Services and PMI Manufacturing are also announced on Wednesday with predictions of 51.6 and 51.4, little change on March’s result. Industrial Orders for February is also out on Wednesday with forecasts of 0% growth m/m, down from 2% m/m in January.
• The Japanese Yen (JPY) was range bound on Tuesday. Japanese government bonds fell, reversing a gain, on speculation accelerating inflation means the BoJ is more likely to raise interest rates than reduce them in future meetings. The USDJPY traded at a high of 103.54 and a low of 102.69 before closing at 102.92. Looking ahead, the Japanese Trade Balance is announced on Wednesday with expectations of $1400bn, up from $970bn for February.
• The Sterling (GBP) recovered from losses on Monday reaching as high as 1.9999 after rate setter Tim Besley said the BoE’s liquidity scheme announced Monday will help the rate setting committee focus on the job of keeping inflationary pressures in the UK’s economy in check. The GBPUSD traded at a low of 1.9745 and a high of 1.9999, before closing at 1.9951 in New York. Looking ahead, the BoE Minutes from the April meeting are to be released on Wednesday with expectations of a focus on financial market liquidity problems and a struggling domestic demand as the reason behind the rate cut to 5.00%.
• The Australian Dollar (AUD) strengthened on Tuesday in the lead up to the release of the CPI figure on Wednesday, however it could not break through the 26 year high of 0.9499. The AUDUSD traded at a high of 0.9473 and a low of 0.9393 before closing at 0.9447. CPI is expected to come in at 1.1% q/q for Q1 and 4.0% y/y. This is a slight increase from 0.9% q/q and 3.0% y/y for Q4. Look for movements in the Aussie dollar if CPI data comes in better or worse than expected.
• Gold (XAU) traded sideways in the Asian session before rising steadily in London trade tracking higher oil prices. Prices rose by US$7.60 an ounce (0.8%) to US$925.20.
• Euro – 1.5975
Initial support at 1.5712 (Apr 18 low) followed by 1.5659 (Apr 14 Low). Initial resistance is now located at 1.6019 (Apr 22 high) followed by 1.6022 (Open this week + range last week).
• Yen – 103.00
Initial support is located at 102.26 (Apr 18 low) followed by 101.71 (Apr 17 low). Initial resistance is now at 104.65 (Apr 18 high) followed by 105.58 (76.4% retracement of the 108.61 to 95.76).
• Pound – 1.9965
Initial support at 1.9692 (Apr 17 low) followed by 1.9600 (Apr 16 low). Initial resistance is now at 2.0027 (Apr 21 high) followed by 2.0048 (Apr 4 high).
• Australian Dollar – 0.9455
Initial support a 0.9272 (Apr 18 low) followed by 0.9250 (Apr 16 low). Initial resistance is now at 0.9473 (Mar 13 high) followed by 0.9473 (Mar 13 high).
• Gold – 920.50
Initial support at 903.40 (Apr 9 low) followed by 873.00 (Apr 1 reaction low). Initial resistance is now at 946.80 (Apr 18 high) followed by 953.00 (Apr 17 high).