Euro added 0.2% to 131.08 yen

Good morning from beautiful Hamburg and welcome to our Daily FX Report. Yesterday, the main U.S. indices slumped, with the technology-focused Nasdaq sustaining the heaviest losses. It shed 2.4%, or 118 points, to close at 4,876 as semiconductor and biotech stocks fell sharply. The decline was the Nasdaq's biggest one-day fall since April 10 last year. It came despite Kraft Foods’ shares, which is listed on Nasdaq, soared more than 35% after the company agreed to merge with Heinz. The merger between the ketchup maker and the company that owns brands including Philadelphia cream cheese is set to create the third-largest food group in the US. The Dow Jones lost 292 points, or 1.6%, to 17,718, while the S&P 500 dropped 30 points, or 1.5%, ending at 2,076.

Anyway, we wish you a successful trading day!

Market Review – Fundamental Perspective

The dollar, following the main share indices in U.S., has declined after an unexpected weak economic data that has investors force to adjust their outlook in the wake of last week’s Federal Reserve meeting. Orders for durable goods dropped 1.4% in February, extending the dollar losses after it slid the most in more than three years last week, as the Federal Open Market Committee cut projections for future rates, inflation and growth. According to this, the dollar weakened 0.4% against the euro to $1.0970 and dropped 0.2% to 119.49 yen. The euro added 0.2% to 131.08 yen, in a good trading session for the share currency. Despite this decline, the dollar has gained against 13 of its major pairs this quarter, adding 9.3% versus the euro, as traders speculate on the Fed raising interest rates this year and the main trend is bullish for the dollar, but this doesn’t mean that any U.S. economic data that miss expectations will not punish the currency. Regarding the Aussie, the Reserve Bank of Australia is losing the currency war as 70% of analysts believe it will have to cut interest rates as soon as next month. Brazil’s real dropped after the central bank said it will scale back support for the currency. The real lost 2% to 3.2010 per dollar, extending its run as the worst performing major currency this year. It has lost 17% against the dollar in 2015 on concern the country could lose its investment grade credit rating and speculation that higher interest rates in the U.S. will damp demand for emerging-market assets. Analysts predict the economy will shrink this year, even if inflation accelerates to the fastest in a decade.

Daily Technical Analysis

XAUUSD (H4)

As we can see in the chart below, this week is being very positive for gold, as the yellow metal is bouncing from its lows and has crossed easily the bearish trend-line initiated in January. Of course, part of this appreciation is coming from the weakness of U.S. dollar in the last days, which has helped in this recovery. At the moment, the short-term trend is bullish, with 1223 dollars per ounce as the first objective. Below the current level, 1170 and the broker trend-line look supports to take into consideration.

Support & Resistance (H4)