Equity Markets Rebound

Last week’s currency trading review

The Dollarweakened considerable as stock markets around the world reboundedsharply and risk sentiment improved considerably. Data was on the backburner with Retail Sales the main focus slightly better than forecastat -0.1% vs. -0.5% expected. Also showing some improvement the Tradebalance falling to -36Bn in January. The Euro endedmuch stronger at EUR/JPY broke higher and the Dollar weakened. GermanIndustrial Production showed another slump down -7.5% on the back ofGerman Factory orders down -8% in January. The EUR/USD gained 2.14%closing at 1.2926, after opening the week at 1.2650. The Japanese Yenexperienced some volatility as USD weakness induced USD/JPY to fallheavily to 95 Yen before buoyant stocks saw the pair recover to themore comfortable 98 level.  The USD/JPY fell -0.23% closing at 98.04after opening at 98.27. The GBP had another round ofextreme weakness with the market finally taking a dim view of thequantitative easing and EUR/GBP had another run higher. The GBP/USDfell -0.77% closing at 1.3985 after opening at 1.4094. The AUDfollowed the Euro and broke above solid resistance at 0.6550 to finishon an extremely strong footing. Underpinning the move higher was Oilwhich rallied over 10% and AUD/JPY which hit month highs on improvedinvestor confidence. Unemployment data was also much stronger thanexpected at +1.5K vs. -20K forecast February Employment Change. TheUnemployment Rate jumped to 5.2% vs. 4.8% previously though. TheAUD/USD closed up 2.69% at 0.6580 after opening at 0.6403.

The forex trading week preview

In the States; Monday TIC flows for January previously at 74Bn and February Industrial Production is forecast at -1.3% vs. -1.8% previously. On Tuesday February Housing starts are forecast at 0.45M vs. 0.466M January. Also released PPI (Feb) forecast at 0.3% vs. 0.8%. On Wednesday CPI (Feb) is seen flat 0.0% vs. 0.0% previously. Also on Wednesday the FOMC decision widely believed to remain at 0.25% with more focus on the supporting statement. On Thursday weekly jobless claims are expected to remain high 650K vs. 654K. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; Monday we see the Feb CPI forecast at 1.2%y/y vs. 1.1%y/y previously. On Tuesday the German Zew Survey is forecast at -7.7 vs. -5.8. The only other data of note is the German PPI (Feb) forecast at -0.2% vs. -1.2% previously and Industrial Production (Feb) forecast at -3.8% vs. -2.6% previously. In the UK; light data week with the NPC minutes the biggest risk event on Wednesday with the market expecting 9-0 cut decision and more details about Quantitative Easing going forward. Also on Wednesday Claimant Count change is forecast at 84.5K vs. 73.8K previously. On Thursday, CBI Industrial Orders are forecast at -55 vs. -56 previously.  We will provide our previews and reviews of these data releases in the daily summary.

In Japan; The BOJ Meeting this week on Wednesday is the main event with the market not expecting any more rate cuts but still very interested in the Press Conference. Any mention of Quantitative easing may cause the Yen to come under pressure especially after the Swiss moves last week. We will provide our previews and reviews of these data releases in the daily summary.

In Australia; RBA minutes from the monetary policy meeting are expected on Tuesday. Also on Thursday we have RBA Assistant Governor Eddy Speaking. We will provide our previews and reviews of these data releases in the daily summary.

TECHNICAL COMMENTARY

• Euro – 1.2925

  Initial support at 1.2733 (Mar 12 low) followed by 1.2617 (Mar 11 low). Initial resistance is now located at 1.2992 (Mar 13 high) at followed by 1.3093 (Feb 9 high)

• Yen – 98.00

  Initial support is located at 95.67 (Mar 12 low) followed by 94.63 (Jan 6 resistance). Initial resistance is now at 98.85 (Mar 11 high) followed by 99.19 (Mar 9 high).

• Pound – 1.4000

  Initial support at 1.3703 (Mar 12 low) followed by 1.3657 (Mar 11 low). Initial resistance is now at 1.4070 (Mar 13 high) followed by 1.4183 (Mar 9 high).

• Australian Dollar – 0.6575

  Initial support at 0.6402 (Mar 11 low) followed by the 0.6307 (Mar 9 low). Initial resistance is now at 0.6643 (Feb 13 high) followed by 0.6799 (Feb 10 high).

• Gold – 927

  Initial support at 905 (Mar 12 low) followed by 889 (Mar 2 low). Initial resistance is now at 944 (Mar 6 high) followed by 958 (Mar 2 high).