Varengold Bank Research Team
Varengold Wertpapierhandelsbank AG
Good morning from a sunny Hamburg and welcome to our first Daily FX Report for this week. As the stalemate in Crimea continues, the biggest story of the weekend is of the crash Malaysian Airlines flight MH370 and the ensuing search for the remains of the aircraft. Speculation is mounting to what exactly occurred but until parts of the wreckage is found, there will be more questions than answers. The search is currently being conducted near the southern tip of Vietnam by more than 20 aircraft and 40 ships from seven different countries.
Nevertheless, we wish you a successful trading week!
Market Review – Fundamental Perspective
As the news in Crimea takes centre stage, markets around the world have started the week with a lot of caution. This combined with a drop in Chinese exports has led to the yen having a strong start to the week. The Japanese currency rose against all of its 16 biggest trading pairs with a twoday meeting of the Bank of Japan beginning overnight. The yen increased 0.2 percent against the US dollar to 103.09 and gained 0.1 percent against the euro to 143.16. The safehaven currency could receive more support dependent upon the general risk sentiment and any change in policy from the BoJ which is due tonight European time. The Australian dollar lead the weakness against the yen as it tumbled 0.5 percent to 93.20 versus the Japanese currency.
Shares in Asia were weak overnight as the MSCI Asia Pacific Index fell 1 percent. This move is in line with concerns by the market as tensions rise in Crimea. Pro-Russian forces have crept further into the region of Ukraine as the war of words between the Russian President Vladimir Putin, German Chancellor Angela Merkel and American President Barack Obama is beginning to heat up. Interestingly, Bloomberg reports that hedge funds are actually increasing their predictions in the euro against the dollar as the number of players who are long reached it’s highest level since December last week.
The biggest news for the Eurozone last week was industrial production which picked up 0.5 percent in January and Mario Draghi’s press conference after the ECB’s rate decision late last week. The President of the ECB raised expectations for Europe’s growth and also reported his belief that deflation risks are easing in the Eurozone. In fact, inflation is predicted to return to the ECB’s target range by the end of 2016.
Daily Technical Analysis
USD/CHF (4 Hours)
As can be seen in the chart below, the USD has been strong against the Swiss franc for the last few weeks. After spending two weeks in a range between 0.8854 and 0.8929, the pair took two attempts to make a break of the resistance level of that range. As the trendline shows, there is still more room for the franc to depreciate against the US dollar but the important factor here will be the reaction to the latest jobs data in the US and the escalating crisis in Ukraine.
Support & Resistance (4 Hours)
This document is issued and approved by Varengold WPH Bank AG. The document is only intended for market counterparties and intermediate customers who are expected to make their own investment decisions without undue reliance on the information set out within the document. It may not be reproduced or further distributed, in whole or in part, for any purpose. Due to international laws/regulations not all financial instruments/services may be available to all clients. You should have informed yourself about and observe any such restrictions when considering a potential investment decision. This electronic communication and its contents are intended for the recipient only and may contain confidential, non public and/or privileged information. If you have received this electronic communication in error, please advise the sender immediately, and delete it from your system (if permitted by law). Varengold does not warrant the accuracy, completeness or correctness of any information herein or the appropriateness of any transaction. Nothing herein shall be construed as a recommendation or solicitation to purchase or sell any financial product. This communication is for informational purposes only. Any market or other views expressed herein are those of the sender only as of the date indicated and not of Varengold. Varengold reserves the right to consider any order sent electronically as not received unless it is confirmed verbally or through other means.
Recommended Content
Editors’ Picks
EUR/USD stays weak near 1.0650 ahead of Eurozone PMI data
EUR/USD remains on the back foot near 1.0650 in European trading on Tuesday. Resurgent US Dollar demand amid a cautious risk tone weighs on the pair. Investors stay wary ahead of the preliminary Eurozone and US business PMI data.
GBP/USD eases below 1.2350, UK PMIs eyed
GBP/USD is dropping below 1.2350 in the European session, as the US Dollar sees fresh buying interest on tepid risk sentiment. The further downside in the pair could remain capped, as traders await the UK PMI reports for fresh trading impetus.
Gold could see a rebound before resuming the correction
Gold price sees a fresh leg down in Asia on Tuesday even as risk flows dissipate. Receding fears over Middle East escalation offset subdued US Dollar and Treasury bond yields. Gold remains heavily oversold on the 4H chart, rebound appears in the offing.
PENDLE price soars 10% after Arthur Hayes’ optimism on Pendle derivative exchange
Pendle is among the top performers in the cryptocurrency market today, posting double-digit gains. Its peers in the altcoin space are not as forthcoming even as the market enjoys bullish sentiment inspired by Bitcoin price.
Focus on April PMIs today
In the euro area, focus today will be on the euro area PMIs for April. The previous months' PMIs have shown a return of the two-speed economy with the service sector in expansionary territory and manufacturing sector stuck in contraction.