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Daily FX Report

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The JPY rose against the USD and EUR

Tue, Apr 7 2009, 07:49 GMT
by Varengold Bank Research Team

Varengold Wertpapierhandelsbank AG

Good morning from Hamburg. Yesterday the Fed announced that they have a currency swap arrangement, which gave the central bank access to $285 billion in EUR, JPY, GBP and CHF. It is good to know that the central banks work together and try to support stability in global markets.

Market review

The JPY rose against the USD and EUR as Asian stocks fell for the first time in five days. This movement damped the demand for higher-yielding securities. The demand for the JPY may also increase on speculation a ministry report will show that Japan had a current account surplus in February.

European producer prices fell more than economist forecast in February and retail sales dropped by a record. This data highlight the increasing risk of deflation in the region. After the report the EUR/USD rose above the 1.3500 level, but it had to remit the gains and closed the day 1.26 % lower at 1.3389. The U.K: auto sales slid 30.5 % in March, the 11th consecutive decline. Thereupon the GBP/USD finished the day session 0.85 % lower and is currently being traded at 1.4682.

On Monday the CAD weakened 0.94 % against the USD as stocks and crude oil declined. Also speculation that the government report on Thursday may show that Canada lost jobs for a fifth month and concern that the central bank may print money to buy debt pressures on the currency. Already the value of building permits fell for a fifth month in February by a far greater than expected 15.9 %.

EUR/JPY

After touching a low at 113.28 in January, the EUR/JPY started a bullish trend period. This week the EUR broke out of the trend duct and crossed in the second attempt the long term Fibonacci Retracement level at 134.06. During the first try, the RSI indicator showed an overbought signal, but now the RSI is quoted below the 70% level. This development might be a signal for a further long potential.

USD/CAD

On a short term view the USD/CAD has been trading in a downward trend channel in April. Yesterday the currency pair rebounded from the support level and increased to the upper line of the channel. If the currency pair could also cross the next resistance at 1.2462, it will develop an inverse shoulder head shoulder formation. But the prospects are clouded because the Oscillator of MA ceases increasing and starts to decrease.

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Published on  Tue, Apr 7 2009, 07:55 GMT