• U.S. Dollar Trading (USD) surged against the Euro on Thursday, the most it has risen against the Euro since December, as traders add to bets the Fed will cease their rate cutting stance to stimulate economic growth and ease the liquidity problems as affects from their previous rate cuts are now starting to be seen. Orders for U.S Durable Goods excluding transportation equipment increased more than forecast in March, indicating parts of the economy are weathering the housing slump. Jobless Claims came in ahead of the forecasted 375k, with 342k reported this week an improvement on last week’s 375k. New Homes for March came in at 526k, slightly down on the predicted 580k and down on the 575k for the month of February, indicating the housing sector in the U.S is still struggling with the credit squeeze. Chicago Board of Trade (CBOT) now shows a 22% chance the Fed will hold the target lending rate at 2.25%, compared with no chance last week. In share market news, the Dow Jones rose 86 points (0.7%) to 12,848.95, whilst the NASDAQ rose 24 points (1.0%) to 2,428.92. Oil eased to US$116.00 a barrel as greenback strength moderated some of the recent gains made on oil. Looking ahead, the Michigan Final is due out on Friday with a change expected from 69.5% down to 63.2%.
• The Euro (EURO) took a dive yesterday as the dollar strengthened on the back of growing speculation the Fed will leave rates on hold at 2.25% combined with declining business confidence in Germany and France with the IFO Business Index for April coming in at 102.4, down on the forecasted 104.3 and March’s 104.8. The Euro’s Current Account for February saw a surplus of $5bn compared to a deficit of -$19.1bn in January. Whilst this figure on face value is positive it could actually signal weakening demand throughout the Euro Zone leading to less imports, rather than growing exports. The weakening Euro was explained by Carl Forcheski from Societe Generale SA, There’s a growing feeling of caution among investors about buying the Euro as there is a growing sentiment that the Fed will stop cutting rates for a while after this month. The EURUSD traded at a high of 1.5896 and a low of 1.5638, before closing at 1.5681 in New York trading.
• The Japanese Yen (JPY) lost 1% against the greenback to 104.39 on Thursday as positive data coming out from the U.S along with stronger equities saw the yen lose ground. Japanese CPI for the month of March came in as forecasted at 1.2%, compared to 1.0% for February. The USDJPY traded at a high of 104.36 and a low of 103.33, before closing at 103.57 in New York.
• The Sterling (GBP) rose the most against the Euro in more than a week after a government report today showed UK retail sales grew faster than forecast on a y/y basis, reducing the scope for further interest rate cuts. Gains in sales of 4.6% in March exceeded the 4.3% forecast. The pound did decline against the dollar as positive U.S data and growing speculation the Fed will leave rates on hold at 2.25% fuelled the resurgence. The GBPUSD traded at a high of 1.9815 and a low of 1.9688, before closing at 1.9746 in New York. Looking ahead, Q1 GDP is due out on Friday with forecasts of 0.4% growth compared to 0.6% growth for Q4. GDP y/y is forecast to be trimmed to 2.6% after a previous figure of 2.8%.
• The Australian Dollar (AUD) paired its recent gains against the dollar as U.S strength and weak commodity prices led to the decline. The Aussie has dropped 2% since reaching a 24-year high of 0.9541 in Wednesday’s trading. A contributing factor to this is the mounting speculation the RBA is unlikely to hike rates given the recent growing CPI figures for Australia. The AUDUSD traded at a high of 0.9483 and a low of 0.9375 before closing at 0.9401 in New York. The Australian and New Zealand market is closed on Friday as it is the Anzac Day public holiday.
• Gold (XAU) fell to a 3 week low, breaking through the key 903 support level as U.S dollar strength signaled the downfall. Gold lost US$20.50 an ounce to US$888.50.
• Euro – 1.5685
Initial support at 1.5638 (Apr 24 low) followed by 1.5510 (Apr 3 reaction Low). Initial resistance is now located at 1.5896 (Apr 24 high) followed by 1.6019 (Apr 22 trend high).
• Yen – 104.35
Initial support is located at 103.32 (Apr 24 low) followed by 102.68 (Apr 22 low). Initial resistance is now at 104.55 (Apr 24 high) followed by 104.65 (Apr 18 high).
• Pound – 1.9735
Initial support at 1.9687 (Apr 24 low) followed by 1.9600 (Apr 16 low). Initial resistance is now at 1.9816 (Apr 24 high) followed by 1.9974 (Apr 23 high).
• Australian Dollar – 0.9390
Initial support a 0.9374 (Apr 24 low) followed by 0.9318 (Apr 21 low). Initial resistance is now at 0.9496 (Apr 24 high) followed by 0.9544 (Apr 23 high).
• Gold – 885.50
Initial support at 882.00 (Apr 2 low) followed by 873.00 (Apr 1 reaction low). Initial resistance is now at 906.78 (Apr 24 high) followed by 926.86 (Apr 23 high).