Top 5 Current Last Change (Pips) Change (%)

NZDJPY
65.30
66.71
-141
-2.16%

AUDJPY
85.16
86.97
-181
-2.13%

CADJPY
90.99
92.91
-192
-2.11%

GBPJPY
141.58
143.23
-165
-1.17%

USDJPY
92.12
93.18
-106
-1.15%

Dollar        

EURUSD
1.3503
1.3497
+6
+0.04%

USDJPY
92.12
93.18
-106
-1.15%

GBPUSD
1.5368
1.5374
-6
-0.04%

USDCHF
1.0610
1.0657
-47
-0.44%

USDCAD
1.0121
1.0027
+94
+0.93%

Euro        

EURUSD
1.3503
1.3497
+6
+0.04%

EURGBP
0.8785
0.8779
+6
+0.07%

EURCHF
1.4329
1.4387
-58
-0.40%

EURJPY
124.39
125.77
-138
-1.11%

EURCAD
1.3665
1.3533
+132
+0.97%

Yen        

USDJPY
92.12
93.18
-106
-1.15%

EURJPY
124.39
125.77
-138
-1.11%

GBPJPY
141.58
143.23
-165
-1.17%

AUDJPY
85.16
86.97
-181
-2.13%

NZDJPY
65.30
66.71
-141
-2.16%

Sterling        

GBPUSD
1.5368
1.5374
-6
-0.04%

EURGBP
0.8785
0.8779
+6
+0.07%

GBPCHF
1.6307
1.6382
-75
-0.46%

GBPJPY
141.58
143.23
-165
-1.17%

GBPCAD
1.5556
1.5411
+145
+0.93%

Markets sentiments changed from risk seeking to risk aversion over last week which resulted in sharp, broad based rally the Japanese yen and strong rebound in dollar. First there was the never-ending drama of the Greece situation and everyone are uncertain on whether Greece will need to get a bailout, when, and where from. That resulted in widening of Greece bond German bund spread and undermine markets confidence on Euro. Secondly, there were speculations that China will tighten against after raising minimum mortgage rates and down payment ratios. Thirdly, news brokeout on Friday about SEC suing Goldman Sachs for fraud related to collateralized debt obligations. Investor rushed out of risky assets which sent DOW down by -1.13% and barely manage to hold above 11000 level.

Yen's strength was felt across the board with NZD/JPY down -2.16%, AUD/JPY down -2.13%, CAD/JPY down -2.11%. Commodity currencies were most hurt as usual in risk averse environment. Commodity were hit hard with crude oil down to close at 83.24 while gold closed at 1136.9. Dollar managed to recover earlier losses against major currencies. While the sharp reversal in dollar pairs and yen crosses worth mentioning, it must be noted that the moves were not enough to confirm reversal in recent decline in the neither currencies yet. For example, the dollar index, which closed the week at 80.77, is still way off recent high of 82.24. Follow through selling in stocks and commodities is needed to push dollar and yen through near term resistance to confirm reversal.

On the Greece situation, Greek PMI George Papandreou requested to meet with the European Union, the International Monetary Fund and the European Central Bank the coming monday regarding prevention sovereign default in the Eurozone. This is the first time that Greece asked for such meetings and it's interpreted by the market as a prelude to requesting the EUR 45b rescue fund. However, However, the funding would not come easily as the German government said it will go through parliamentary approval and it may take several months to complete.

Moreover, German economists threatened to legally challenge the deal as it violates the spirit of the Maastricht Treaty which created the European Union and led to the creation Euro in the 90s. Economists claim that the treaty contains a clause preventing EU states from taking on the debt obligations of their neighbors. Joachim Starbatty, a leading economist and professor at Tuebingen University, said a suit might be filed at the Constitutional Court against the credit from euro states. In addition, there were concern that bailout of Greece might eventually lead to break up of the Euro. An analyst report pointed out that Greece bailout and ECB's softer collateral stance set a bad bad precedent for other euro area member states and warned that the euro are might degenerates into a zone of fiscal profligacy, currency weakness and higher inflationary pressures over time. If that happens, countries like Germany might leave the euro and introduce a stronger currency.

The Chinese government raised minimum mortgage rates and down payment ratios for some home purchases so as to cool down property prices which rose at a record pace in March. Earlier in the week, the National Bureau of Statistics reported GDP growth of +11.9% y/y (consensus: +11.7%) in 1Q10, the strongest-growth-in-3-years. Together with fast-expanding industrial production (+18.1% in March) and retail sales (+18% in March), the Chinese government is under much pressure to adopt more tightening measures such as increasing required reserve ratio in commercial banks, raising the flexibility of the RMB as well as hiking interest rates.

On Friday, the SEC accused Goldman Sachs of fraud of selling mortgage investments without telling the buyers that the securities were crafted with input from a client who was betting on them to fail. The securities cost investors close to $1 billion while helping Goldman client Paulson & Co., a hedge fund, capitalize on the housing bust. The SEC is seeking to recoup the money lost by investors and impose unspecified civil fines against Goldman Sachs and the executive. The SEC could enter into settlement negotiations over the amount if Goldman decided not to fight the charges in a trial.

Technical Highlights

Looking at the charts, S&P 500 dropped sharply from intra-week high of 1213.9 to close at 1192.1 last week. A short term top is in place and we'd expect more trading below 1213.9 in near term. However, there is no solid evidence of reversal yet and we'd prefer to wait for a break of 1150.45 resistance turned support before looking at the possibility of reversal seriously. Nevertheless, upside potential should also be limited as S&P would then face strong resistance at around 1230 key resistance zone. So in short, we'll stay neutral in stocks for the moment and wait and see.

Similar to stocks, AUD/JPY face strong resistance below 61.8% retracement of 107.86 to 55.11 at 87.71 and dropped sharply. The cross is now expected to stay below 87.52 for a while at least. It's not advisable to buy on dips as the whole medium term correction from 55.11 might in the end conclude around 87/88 area. Meanwhile, it's still premature to confirm reversal yet and we'd prefer to wait for a break of 81.70 support before going short on the cross. So we'll stay neutral first.

Dollar index drew support from 55 days EMA and recovered but at this point, there is no confirmation of rally resumption yet. Consolidation from 82.24 might still continue with another fall to 79.51 and below to correct the five wave rally from 74.19 to 82.24. Though, the index is expected to stage at least one more medium term rally towards 89.62 high after completing the current pullback.

Currency Heat Map Weekly View

  USD EUR JPY GBP CHF CAD AUD

USD
 
 
 
 
 
 
 

EUR
 
 
 
 
 
 
 

JPY
 
 
 
 
 
 
 

GBP
 
 
 
 
 
 
 

The Week Ahead

Initial focus of the week will be on whether selloff in US stocks will carry on or we'll see strong rebound. Also, meeting between EU, ECB and IMF on Greece issue will also be closely watched. Going forward, a number of important economic data will be released from UK including CPI, employment, retail sales, GDP and BoE minutes. BoC rate decision will be watched for any change in the accompanying statement.

  • Monday: US Leading indicators; New Zealand CPI
  • Tuesday: RBA minutes; UK CPI; German ZEW; BoC rate decision
  • Wednesday: UK job report, BoE minutes
  • Thursday: Eurozone PMIs; UK retail sales; Swiss ZEW; BoC monetary policy report; US PPI, existing home sales
  • Friday: German Ifo; UK GDP; Canada CPI, retail sales; US durables, new home sales

EUR/JPY Weekly Outlook

EUR/JPY had another rally attempt last week but failed below 127.88 resistance and dropped sharply. Outlook is mixed for the moment as on the one hand, the head and shoulder bottom pattern suggested that EUR/JPY has reversed. On the hand, we have not seen decisive momentum to stay above 55 days EMA yet. We'll stay neutral first. On the downside, through, break of 123.41 support will start to argue that choppy rise from 119.64 is merely a correction and has completed at 127.88 already. Intraday bias will be flipped to the downside for 121.05 support for confirmation. Break will target a new low below 119.64. On the upside, above 126.07 will flip intraday bias back to the upside. Break of 127.88 will affirm the bullish case that EUR/JPY is resuming medium term rebound.

In the bigger picture, price actions from 112.10 are treated as correction to long term down trend from 2008 high of 169.96, no doubt. Question is whether such correction is completed at 139.21 already and another rise would still be seen. The momentum of the rise from 119.64 is not strong enough to confirm the bullish case yet and we'll stay neutral. On the upside, another rise above 127.88 will reaffirm the bullish case that rise from 112.10 is resuming for another high above 139.21 before completion. On the downside, break of 121.05 support, however, will revive that case that EUR/JPY has already topped out in medium term at 139.21 and will pave the wave for another low below 112.10 instead.

In the long term picture, up trend from 88.96 (00 low) has completed at 169.96 and made a long term top there. Fall from 169.96 should develop into a three wave correction with first wave completed at 112.10. Second wave from 118.10 might still be in progress but after all, we'd expect another long term fall to 118.10 and beyond after the third wave starts.

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EUR/JPY

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EUR/JPY