The concerns regarding about the American regulator's hawkish actions, the Bank of Japan's idleness on it's last meeting, the decrease of oil prices and the issue of British exit from the EU being resumed were the main cause of risk aversion.
The press conference of Janet Yellen was the investor's center of attraction and the market did not hope for any revision of rates from the Federal Reserve. As we have all known, Yellen's statement did not have any difference from the previous statements. The regulator stated that the Fed will heighten the rates only if the regulator finds growth and the labor market positive tendency as the monetary authorities will closely monitor incoming macroeconomic data. Yellen did not confirmed the date of the next rate hike yet and said that Fed's attainment should involve a lower pace of rate growth. The EUR/USD pair grew.
Two important releases was published by the UK. First is the unemployment rate for January which occurs at the reported level wherein the recent value was -5.1% and the report was 5.1%. Next is the Average Earnings including bonus for January which came in at the level 2,1% wherein the recent value was 1.9% and the report was 2.0%. The GBP/USD pair increased by the end of the trades.
The USD/JPY was expected to leave the flat soon but this can be very volatile. Japan's economy continuously shows a slowdown and it does not need a sturdy yen. Simultaneously, the strong dollar is not a pleasing factor for the US Federal Reserve due to the negative impact to US exporters brought by the strong dollar. The USD/JPY pair decreased by the end of the trades.
The Fed's decision to keep the monetary policy unchanged cause the dollar to descend aggressively in opposition to the Swiss franc. As we have anticipated, the regulator was certain to left the policy unchanged as the National Bank of Switzerland hold its meeting on Thursday.
The first support occurs at 0.9660 and at 0.9580 subsequently. The first resistance resides at 0.9750 and at 0.9850 subsequently.
A confirmed and a sturdy sell signal has been found. The price is below the Ichimoku Cloud and it is below the Chikou Span. The Tenkan-sen forms a descending movement and the Kijun-sen displays a horizontal movement. The downward movement will remain until the price is below the Cloud.
The MACD indicator is in a negative location. The price is declining.
The Fed meeting has gone by and the regulator made changes in his plans and declared only two rate hikes instead of four. The market also remained unstable after the meeting.
The demand for euro as a funding currency keep on growing in spite of the fact that the "risk appetite" is also increasing. This factor was completely disregarded by the market which manifested the presence of strong buyers. The dynamics of the debt market signified varied trends as the 10-year government bonds yield in Germany increased in connection in the UK, but decreased to US Treasuries. The EUR/USD pair decreased by the end of the trades.
We did not received any significant macroeconomic data from the UK. We think that investors will be more attentive on the dynamics of oil market. Improving the highest of the last trading week, black gold fell by 3%. The demand for oil affected the pound/dollar pair in a usual positive way. The GBP/USD grew by the end of the trades.
The dollar/yen pair marked a new low for the last 14 months. This kind of aggrandizement of the yen could be a menace to exporters and may also disgruntle the monetary authorities of Japan. The US issued consumer confidence from the University of Michigan wherein it showed 91,7 contrary to the reported 92,1. The USD/JPY pair grew by the end of the trades.
As the United States and Japan government bonds yields divergence decreased to some extent, the debt market dynamics manifested an averaged demand for the Japanese currency. This also cause to lessen the appeal of the US assets. The USD/JPY pair grew a bit by the end of the trades.
The first support occurs at 111.40 and at 110.60 subsequently. The first resistance lies at 112.20 and at 113.00 subsequently.
A confirmed and a sturdy sell signal has been found. The price is below the Ichimoku Cloud and it is below the Chikou Span. The Tenkan-sen forms an ascending motion and the Kijun-sen displays a horizontal motion. The descending movement will remain until the price is below the Cloud. The MACD indicator is in a negative location. The price is retrieving.
Being halted from increasing in opposition to the major currencies on Tuesday, the dollar still gained support caused by the investors who stick on being heedful as a round of terrorist attacks in Brussels killed 26 people and left more than 100 injured. This devastating events in Brussels affected the euro and the British pound negatively.
The market slightly strengthened in the absence of important macroeconomic reports. Likewise, US releases did not help to enliven the market. The existing Home Sales for February embark at a low level wherein it was lessened by 7.1% whereas analysts had hoped for a more moderate fall of 2.8%. The Chicago Fed National Activity Index for February embarked at -0.29 contrary to the reported +.025 and the previous value of +0.41.
Our focus will be on the IFO Institute release. The dynamics of Gross Domestic Product of Germany is closely corresponded with this indicator and investors always keep an eye on it. This indicator has been consistently giving a negative trend for the last three months. In the midst of euro's growth, the market did not anticipated the data to be better than the consensus report. However, the data embarked at the level of 106,7 contrary to the reported 106,0. The euro/dollar pair decreased.
An Inflation Report was released by the UK. As expected, the sturdy labor market data pointed to the forecast that was a little better than the consensus report. The average monthly income was 0.2% in the last three months which would heighten inflationary pressures whilst the unemployment in UK is at the bottom-most level now since 2005. The Consumer Price Index embarked at the level of 0,3% y/y and 0,2% m/m contrary to the reported 0,4% y/y and 0,4% m/m. The pound/dollar pair aggressively declined by the end of the trades.
As of now, we are not expecting a sturdy increase of quotations. The investors were not pleased with the United States' poor macroeconomic data wherein the Existing Home Sales for February lessened by 7.1%. The home sales reduced by 6.7% from January to March which only certified again the assumptions that the Americans started to save more than spending. The dollar/yen pair became stronger.
Sterling continued its low trajectory on Wednesday amidst negative economic data, terrorism attacks in Europe, and rising worry surrounding the Brexit.
The Bank of England announced a stagnant 0.3 percent inflation rate, missing the projected 0.4 percent rise. The news was paired with a looming interest rate cut, which has been standing at 0.5 percent since 2009. The nearest rate increase is in another three years, while the US is expecting at least two rate hikes this year, pushing the dollar upward.
UK’s controversial 2016 budget was also bad news for the ailing pound. Many were disappointed with budget cuts, with Secretary of State for Work and Pensions Duncan Smith resigning on Friday over lower disability benefits.
The pound fell further from its 1.4251 after the inflation announcement.
The first support occurred at 1.4094 and 1.4024 subsequently. The first resistance was at 1.4304 and 1.4375 subsequently.
The MACD indicator is at positive location. The price is falling.
The efficacy of the stimulus measures held by the European Central Bank is drawing near its boundary as stated by the president of the Netherlands Bank, Klaas Knot. He thinks that the ECB monetary policy instruments have been worn out.
The first support occurs at 1.1150 and at 1.1050 subsequently. The first resistance resides at 1.1260 and at 1.1350 subsequently.
The price is along the Ichimoku Cloud and it is over the Chikou Span. The Tenkan-sen forms a horizontal movement and the Kijun-sen shows a descending motion creating a "Dead Cross".
The MACD indicator is in a negative location. The price is correcting.
The British pound slightly recovered from last week’s trading as it hit a daily high at 1.4180, taking advantage of the dollar’s respite. However, the pound’s strength is expected to be short-lived as the uncertainty of the Brexit looms over the market.
A bearish outlook on the pound remains leading to the EU referendum in June. On the other end, a stronger dollar is anticipated in the following days as investors remain hopeful for a rate hike in the near future based on Fed officials’ vague remarks.
The first support occurred at 1.4098 and 1.4028 subsequently. The first resistance was at 1.4149 and 1.4220 subsequently.
The MACD indicator is at a negative location. The price is falling.
The dollar managed to recover most of its losses which is an aftermath of the Federal Reserve meeting, and is being in demand continuously. In the midst of the Catholic Easter celebration, the traders' activity was inferior. We are hoping that today the volatility shall resume as the traders' return from their holidays' activities.
The Gross Domestic Product forecast of the US is somewhat strong and is quite surprising which of course sustained the dollar as well. The GDP was altered upwards. In the fourth quarter, the US economy increased by 1.4% contrary to the previous estimate of +1.0% and an increase of 2% in the third quarter. In favor of an early rate hike, these figures became another cause of disagreement which was consistently uttered by the Fed's representative in the past week wherein it also turned out to be supporting the demand for the dollar. The US has issued the Pending Home Sales for February wherein the data occurs at the level of 3,5% and the report was 1.0%. The EUR/USD pair slightly increase by the end of the trades on Monday.
The GBP/USD was still weak and continuously move down in the midst of concerns regarding the effect of Brexit. High risks in Brexit effect enkindled growth in volatility for the pound and the pair. The GBP/USD grew by the end of the trades.
In favor of the United States, the inflation forecast for February between Japan and US modified their differential of CPI indicators. In January, the spread was 0.1% and grew by 0.43% in the last month of winter. The USD/JPY pair reduced by the end of the trades.
The extensive demand for the dollar reinforced the pound/dollar pair. The Manufacturing PMI will be issued on Friday and so we propose to focus on it as well as we wait for Bank of England Chairman Mark Carney's performance on Thursday.
The price's first support occurs at 1.4320 and at 1.4240 subsequently. Meanwhile, the first resistance resides at 1.4400 and at 1.4480 subsequently.
A non-confirmed and a sturdy buy signal has been found. The price is over the Ichimoku Cloud and it is on top of the Chikou Span. The Tenkan-sen and the Kijun-sen display an ascending movement creating a "Golden Cross". The ascending motion will remain until the price is over the Cloud.
The MACD indicator is in a positive location. The price is increasing.
The dollar experienced remarkable losses. The tremendous tender eloquence of the Fed oppressed the US currency. The external and internal risks has given emphasis by the regulator and stated that there would be a probable policy easing if needed. The statement of the regulator implies an essential enfeeblement of the dollar in coordination with its viable return to the economy stimulation. The ADP for March was issued on Wednesday wherein the report was 194,000 while the previous value was 214,000. The data occurred at the level of 200,000.
Disregarding the growth of risk appetite is not possible which is an aftermath of the growing long positions and high-yield cross-rates of the traders which gave pressure to the euro as a funding currency. The EUR/USD pair stabilized by the end of the trades.
The debt market dynamics correspond to the British currency rectification. In relative with their counterparts, United States and Germany, the 10 years UK government bonds yields decreased which also caused to diminished the appeal of the British assets. On Thursday, the performance of the Bank of England will be the center of attraction. The GBP/USD pair reduced by the end of the trades.
The United States and Japan's yields differential on government bonds reduced from November to February. In Japan, the Retail Trade revenue diminished by 5.4%. The 0% retail sales differential indicator of the Japan and US at the end of January managed to extend as far as level of 2.2% in favor of the latter in February. The USD/JPY pair slightly grew by the end of the trades.
The Japanese Yen expanded in today’s early trading as Fed chairwoman Janet Yellen’s dovish remarks on Tuesday prompted investors to sell their greenbacks. The currency pair hit a daily low of 112.25.
Yellen’s speech on Tuesday to the Economic Club of New York said that caution must be exercised in hiking interest rates, lessening the possibility of a rate increase during Fed’s upcoming meeting in April. However, Yellen is optimistic on the growth of the US economy.
The dollar experienced a rally in the past weeks due to other Fed officials’ hawkish statements that implied they are eyeing to raise the numbers.
The speculation of a rate increase is now expected in Fed’s next meeting in June.
Yellen’s announcement put the Bank of Japan (BOJ) in a more difficult position, which is battling stagnant deflation amidst strong currency. BOJ’s negative interest rates set in January did very little to help the situation.
Eyes are now on BOJ Governor Haruhiko Kuroda to see what monetary tools he will use to ease the problem. The BOJ may be forced to further lower the interest rates during its policy meeting in April.
The first support was at 111.82 and 111.26 subsequently. The first resistance was at 112.62 and 113.19 subsequently.
The MACD indicator is in a positive location. The price is falling.
The Australian dollar is riding the bulls while the greenback is too weak to follow owing to the sell-off after Fed chairwoman Janet Yellen’s speech on Tuesday. In fact, the Aussie dollar is gaining too much for the Reserve Bank of Australia’s (RBA) liking.
AUD has now reached the level of 0.77, its highest in two weeks. Investors are selling their dollars and opting for Aussie ones as the latter has a better yield. However, questions are aloft on the RBA’s next move over the currency’s overvaluation.
RBA officials had previously said that the Aussie dollar is “getting ahead of itself” without significant signs of slowing down. Banks are also aiming for a lower domestic currency to successfully transition to a services-oriented economy from a mining-oriented one.
Yellen disappointed many central banks including the RBA after saying on Tuesday that tightening monetary policy should be approached with caution, slashing the hopes of many that they will see a rate hike in its policy meeting in late April.
Earlier this month, the RBA was forced to revise Aussie dollar expectations by the end of the year from US70¢ to US75¢. Furthermore, the current inflation is at 1.7 percent, missing the bank’s target of 2 to 3 percent.
If the RBA is to take a hawkish stance during its policy meeting on Tuesday, only two course of actions are in the horizon: to jawbone the Australian dollar or to cut bank rates, which now stand at a record low of 2 percent.