The Australian dollar lead the weakness against the yen

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)