A day prior to the US Non-Farm Employment Change report, ECB President Jean-Claude Trichet set the stage for the first European interest rate increase since the financial crisis.
Forex Market Trends
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
| Daily Trend |  |
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| Weekly Trend | |
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| Resistance | 1.4065 | 1.6385 | 83.35 | 0.9415 | 1.0235 | 0.8670 |
| 1.4020 | 1.6345 | 83.00 | 0.9380 | 1.0200 | 0.8635 | |
| 1.3985 | 1.6305 | 82.65 | 0.9350 | 1.0170 | 0.8600 | |
| Support | 1.3925 | 1.6250 | 82.05 | 0.9285 | 1.0100 | 0.8530 |
| 1.3890 | 1.6220 | 81.75 | 0.9245 | 1.0070 | 0.8500 | |
| 1.3850 | 1.6180 | 81.40 | 0.9200 | 1.0035 | 0.8465 |
Economic News
USD – US Dollar Gains on Weekly Unemployment Data
A significant drop in weekly US unemployment claims helped spur dollar gains versus the major currencies. The lone exception to this price action was versus the euro where the pair surged to its highest level since November 2010 on the back of hawkish comments by the ECB. Weekly unemployment claims came in better than expected with new jobless claims falling to 368K from the previous week’s 388K. Labor economists had forecasted a rise to 394K jobless claims.
At the end of the day’s trading, the EUR/USD was up at 1.3960 from 1.3855. The USD/JPY surged to close higher at 82.40 from 81.83, while the GBP/USD was down at 1.6270 from 1.6312.
The drop in unemployment claims also spurred gains in higher yielding assets as the major US equity indices were up by more than 1%. The Dow Jones Industrials Average rallied by 1.59%.
All eyes now turn to the release of the US Non-Farm Payrolls report that is expected to show the US added 180K new jobs in the month of February after the economy added 36K jobs in January. However, this release may be taken with a grain of salt as the report could be subject to weather related effects. The trend of a weakening dollar looks to continue but could be reversed if the payrolls report surprises to the upside.
Following yesterday’s breakout, resistance for the EUR/USD is found at 1.4080 with a further target at the trend line that falls off of the January and November 2007 highs which comes in today at 1.4150. Support is located at yesterday’s low of 1.3830, 1.3700, and the rising trend line off of the February 14th low at 1.3640.
EUR – Euro Soars on Trichet Comments
The euro gained across the board today following ECB President Jean-Claude Trichet’s hawkish comments that solidified future interest rate increases in the euro zone. The message was crystal clear when Trichet stressed “strong vigilance is warranted.” He also suggested a rate hike could come as early as the next ECB meeting which is scheduled for April 7th.
Following the speech the EUR/USD rose to its highest level since November 2010, peaking at 1.3975 and closing near its high at 1.3960, up from 1.3855. The EUR/CHF was also up sharply, trading as high as 1.3019 and closed at 1.3000 from 1.2803.
These comments by Europe’s leading central banker show the ECB’s commitment to fight inflationary forces. Rising food and commodity prices have the ECB concerned that if it does not get out ahead of inflation concerns then rising prices could have a negative impact on the euro zone economy.
The ECB kept its rate steady at 1.00%. However, Trichet did emphasize that this may not be the start of a rate tightening cycle. These strong comments will increase expectations for quicker adjustments to rates as well as a faster timetable for interest rates to rise.
This is certainly a catalyst for the euro and further gains may be expected. The appreciation seen yesterday in the EUR/CHF took the pair as high as the 61.8% Fibonacci retracement level from the February downtrend. Further resistance may be found at 1.3080, a level that coincides with the falling downtrend from the November and February highs. A move above this level would target the 200-day moving average at 1.3170.
JPY – USD/JPY Rises on US Employment Data
Yesterday the dollar strengthened versus the yen following better than expected US weekly jobless claims. Weak capital expenditure also had traders buying the pair as Japanese companies increased capex spending, though at a slower pace than the market expected. Q4 capital expenditure rose by 3.8%. However, economists had forecasted an increase of 5.9%
Following the yen negative economic data, the USD/JPY rallied sharply higher, moving above its first resistance level at 82.20 to close at 82.40 after opening the day at 81.83.
Further gains in the pair may be expected tomorrow should the US Non-Farm Payrolls report show an improving employment picture in States. A minor resistance level at 83.50 looks to be reinforced as this price coincides with the 200-day moving average, a resistance level the pair failed to break previously in mid-February.
Crude Oil – Crude Oil Prices Rebound from Earlier Losses
The price of spot crude oil fell earlier in the day on reports of a possible settlement that would end the fighting in Libya. However, once this this rumor was dispelled by Libyan officials, spot crude oil rose from the daily low and is now trading back above the $102 mark.
Prices fell as low as $100.15 before rebounding to the opening day price near $102.21.
The drop in prices that moved in tone with a potential settlement of the conflict underscores just how closely the price of crude oil tracks the violence in the Middle East. An absence of Libyan crude supplies is also beginning to have an impact on European crude oil stocks as Europe is the main recipient of Libyan crude exports.
Tomorrow’s US jobs report will be moving crude oil markets. A better than expected jobs report may support rising crude oil prices. Resistance is found at last week’s high of 103.30, followed by $110.00.
Technical News
EUR/USD
Yesterday’s move puts the pair at its highest level since November 2010. A rising 20-day moving average points to further gains for the pair with targets at 1.4080 with a further target at the trend line that falls off of the January and November 2007 highs. This level comes in today at 1.4150. Support is found at yesterday’s low of 1.3830 and the rising trend line off of the February 14th low at 1.3640.
GBP/USD
The pair looks to make a close above the falling trend line off of the January, November, and February highs which bodes well for the pair. Traders may want to target the January 2010 high at 1.6450. Support is located at 1.6210 and the rising trend line off of the January 2011 low which comes in today at 1.6110.
USD/JPY
After breaking out of a triangle consolidation pattern, only to retrace back inside the upper boundary, the pair has once again moved above this falling support line off of the January and February highs and should continue to move higher. Initial targets should be the 83.50 resistance level followed by the February high of 84.00. Support comes in at this week’s low of 81.60.
USD/CHF
Yesterday’s sharp rise in the value of the pair looks to have stalled at the 0.9330 resistance level. With the 200-day, 100, 50, and 20-day moving averages aligned in a perfect order, this may present an opportunity to enter into the downtrend following the pullback in the price. Should the pair add to yesterday’s gains, resistance looks to be found at 0.9440 and 0.9500. Support is located at Wednesday’s low at 0.9200.
The Wild Card
Crude Oil
Spot Crude Oil is set to post its second consecutive week of strong gains. Currently the price is testing the 61.8% Fibonacci retracement level from the 2008 collapse in oil prices at $104.00. A move above this level would signal to forex traders to target the $110.50 resistance level.
Written by Forexyard.com