The euro remains close to two and a half year highs

Good morning from a sunny Hamburg and welcome to our Daily FX Report. The Champions League lost two more teams yesterday evening as Bayern Munich knocked out Arsenal and Athletico Madrid’s impressive win over AC Milan was enough to secure their birth into the quarter finals. In this evening’s matches, Paris St. Germain is expected to progress after a convincing away game against its opponent Bayer Leverkusen while the match between Barcelona and Manchester City should be a good spectacle.

As usual, we wish you all a successful trading day!

Market Review – Fundamental Perspective

The Australian dollar continued its losses overnight after poor Chinese data was supplemented by disappointing consumer confidence and business sentiment reports as well. Meanwhile, the New Zealand dollar has remained fairly strong over the same period as the central bank there is expected to increase interest rates later this evening. Similarly, the yen also held its value due to its statues as the Asian safehaven currency. It currently trades around 103 per dollar and 142.75 against the euro.

On the back of the Chinese data, there are a few analytical indices worth mentioning. Deutsche Bank’s Currency Volatility Index is currently down at 7.17 percent which is testing lows on December 2012. The index measures volatility in nine major world currency pairs and shows how little movement there currently is in currency markets as they wait for the next indicator for a clear direction. Raw Material indices are also falling dramatically after that Chinese data puts downward pressure on many different commodities.

The euro remains close to two and a half year highs with industrial production data for the region due out later today. Economists are forecasting a return to growth in January with expectations being that output grew by 0.5 percent for the month.

In geopolitical news, the rhetoric about Ukraine is intensifying as world leaders continue to condemn the Russian army staying in Crimea. The referendum scheduled for this weekend is putting particular pressure on meetings between the interim Prime Minister and U.S. President Barack Obama in Washington. The deposed President of Ukraine has warned that there is a chance of civil war in the troubled country. Neither party seems to be backing down at present.

Daily Technical Analysis

USD/JPY (4 Hours)

After trending up from it’s low at the beginning of March, this pair looks to have at least temporarily broken the trend after the Bank of Japan announcement yesterday. The currency pair bounced off February’s high and has now formed a level of support at that point. With the Stochastic crossing over, the USD/JPY looks like it may enter a period of sideways movement.

Support & Resistance (4 Hours)