Trading Currency Roundup

  • Currencies stabilized with global equities Tuesday after a Monday sell-off on heightened risk aversion.
  • The euro has retraced its decline and is higher against the dollar and yen. The dollar has also bounced back against the yen.
  • Analysts cite quarter-end flows as the dominant factor moving markets. However, risk sentiment also received a bounce after Japanese Prime Minister Taro Aso unveiled a new stimulus package.
  • Tuesday morning in New York, the euro was at USD1.3316 from USD1.3190 late Monday. The dollar was at JPY98.57 from JPY97.26. The euro was at JPY131.32 from JPY128.30. The U.K. pound was at USD1.4308 from USD1.4250, and the dollar was at CHF1.1380 from CHF1.1489.
  • In Germany, the euro zone’s largest economy, unemployment rose in March, a month when firms usually hire, for the first time since records began in 1928.
  • The Organization for Economic Cooperation and Development said Tuesday that the euro zone economy has entered a deep recession and predicted a 4.1% contraction in gross domestic product this year.
  • The OECD called for the ECB to cut interest rates quickly and start quantitative easing, a strategy of buying securities on the open market to boost money supply. The U.S. Federal Reserve and the Bank of England both have taken this step.
  • The Canadian dollar was stronger early Tuesday in conjunction with overnight equity and commodity price gains, coupled with the global unwinding of Monday’s safe haven bid for U.S. dollars. There was minimal market reaction to early news of a 0.7% decline in Canada’s January gross domestic product, a result that was in line with consensus forecasts.

Trading Currency Market expectation

  • Currency traders are awaiting the outcomes of the European Central Bank monetary policy meeting and Group of 20 summit, both Thursday.
  • EURUSD deflates back under USD1.3300 area now after earlier lift, said to be on a light stop flush, stalled just atop USD1.3340 and in a zone of offers said to extend to USD1.3350. Flows remain modest, market is very order-driven, traders say, but while chatter/focus remains on the quarter-end London fixing and flows therein, traders remain somewhat uncertain of direction, suspecting that earlier chatter of RHS interest may see the market “set up” already.
  • Pound tracks euro-dollar slippage, moves down to begin challenge on support between USD1.4285/80. Traders earlier suggested that rate had room to move toward this area and while it holds above seen keeping hopes alive for further upside potential. A break to dent this scenario can open a deeper pullback toward USD1.4250.

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