Market review for 14 – 18.03, 2011
The whole previous week trading was mainly influenced by the outcome of the devastating earthquake in Japan, major problems with the Fukusima NPP and the growing tension in the Northern African region and the Middle East. As a result, during most of the week the demand for the save-heaven assets was increasing.
In the beginning of the week the Euro-zone leaders carried out the additional $600B in quantitative easing program. This announcement was unexpected by the market participants. The European credit rate for Greece was reduced, but the credit rate for Ireland was increased. As a result, the euro started the previous trading week with growth. The EUR/USD pair traded at the maximum level of $1,3960.
On Monday the Bank of Japan left the principal rate unchanged at the previous level of 0.10%. As a save-heaven asset, the yen rate grew and the USD/JPY pair showed minimums at Y80,50. The Bank of Japan injected Y15 trillion into Japanese capital markets and expanded its asset purchase program to Y40 trillion. This decision managed to limit the yen growth. As a result, the USD/JPY pair showed maximums at Y82.47.
Speculations regarding the possibility that Japanese demand for oil after the devastating earthquake on Friday would decrease, pressured the oil rate. The oil prices dropped below the $100 mark per barrel. At the same time the gold rate increased and reached the $1,426.70 level per ounce.
On Tuesday the euro received additional pressure after the publication of the Euro-zone fundamentals. The German ZEW survey (Economic sentiment) for March decreased and turned out to be below forecasts: 14.1 against the expected 16.0. The current situation index was below the forecast as well: 85.4 against 86.0. As a result, the EUR/USD pair dropped to the minimums of $1.3852. At the same time the US dollar was supported as a result of the forecasts of the FRS statement, which was expected to announce the improvement of the US labor market. Greenback was also supported as a save-heaven currency after the announcement of the possible radiation contamination risk as a result of the earthquake in Japan. Explosions at the nuclear power plant in Japan, as a result of the devastating earthquake, supported the yen as a save-heaven currency. Bank of Japan continued to support national finances of the country. Additional 5 trillion yen were injected into the financial system.
Swiss Frank received considerable support as a save-heaven currency and reached historical maximum against the greenback at the level of 0,9137 on Tuesday.
Trading dynamics changed during the American session after the release of the FOMC meeting results. The interest rate was left at the previous level of 0.25% and will be kept at this level unchanged for a “considerable period of time”. The QE2 program was left at the volume of $600B. As a result, the US dollar has lost its attractiveness and the EUR/USD pair grew to the $1.4012 level.
On Wednesday the euro showed decrease after the release of the Moody’s credit rating for Portugal, which was reduced from A1 to A3 with the negative forecast. Concerns over the European budget crises reinforced again. The EUR/USD pair dropped to the minimums of $1.3925. On the same day the USD/JPY pair set a 16-year minimum today at the level of Y76,73 due to the growing concerns regarding the risks of radiation leaks in Japan.
On Thursday the EUR/USD pair showed minimums at the level of $1.3870 during the Asian trading session. Maximums were reached at the level of $1.4054 due to the announcement that Spain sold bonds for 3219 billion euro of the year 2021 and for 911 billion euro of the year 2041. At the same time the GBP/USD pair demonstrated maximum at the $1.6120 mark. European session brought sterling to maximums of $1.6170. The speculations over the possibility that Britain could start an air attack on Libya supported the growth of the pound. Market participants were monitoring the development of the situation at the Fukusima NPP. After the released confirmation that the situation showed some stabilization, the yen dropped from the reached maximums.
According to the released information on Thursday, the Initial jobless claims volume decreased below expectations. Industrial production showed unexpected decrease for 0.1% against the forecasted growth of 0.6%. The Philadelphia Federal index turned out to be above expectations and above the previous month’s level. Nevertheless, the release of the US data did not have any impact on the market dynamics, since investors were mostly influenced by the situation in Japan.
After the conference of the Ministers of Finances and heads of the National banks of the G7 countries, it has been decided to perform a mutual intervention aimed to decrease the rate of the yen. As a result , the USD/JPY reached the Y81,47 level. The EUR/USD increased and closed the trading week at the $1.4183 mark.
Weekly technical analysis for 21 – 25. 03
EURUSD
The pair has broken triangle’s upper border and aiming to the channel line at 1.42557. The pair may roll back before break it.
Resistance: 1.44835, 1.47697, 1.50676
Support: 1.41130, 1.37441, 1.33427
GBPUSD
The pair has broken triangle’s resistance and aiming to 1.64272.
Resistance: 1.64274, 1.68504, 1.72652
Support: 1.59962, 1.52523, 1.48532
USDCHF
The pair may return to 0.91074 and higher. MACD convergence may support pair to start corrections.
Resistance: 0.91074, 0.93264, 0.96525
Support: 0.88022, 0.85633, 0.82723
USDJPY
The pair has broken triangle and aiming to 80.244.
Resistance: 83.330, 86.836, 90.909
Support: 80.244, 76.535, 73.126
AUDUSD
The pair is trying to recover after sharp fall. The level of 1.01873 may become a strong resistance for the pair because MACD divergence.
Resistance: 1.01873, 1.03847, 1.05810
Support: 1.00031, 0.97889, 0.94048