The yen's share of global reserves is about 4 percent

Good morning from Hamburg and welcome to our latest Daily FX Report for this week. Russia’s decision to lift a ban on the delivery of an air-defense missile system to Iran amid nuclear negotiations drew objects form the U.S. and sharp criticism from Israel. They warned the move would allow Iran “to arm itself with advanced weapons and increase its aggression.” Russian President Vladimir Putin repealed the self-imposed 2010 prohibition on exporting the S-300 missile system, adding a new wrinkle to U.S. President Barack Obama’s attempts to win domestic support for the agreement on the Islamic Republic’s nuclear program.

Anyway, we wish you a successful trading week!

Market Review – Fundamental Perspective

Sovereign and corporate borrowers outside America owe a record $9 trillion in the U.S. currency, much of which will need repaying in coming years, data from the Bank for International Settlements show. In addition, central banks that had reduced their holdings of the greenback are starting to reverse course course, creating more demand. The dollar’s share of global foreign reserves shrank to a record 60 percent in 2011 form 73 percent a decade earlier, though it’s since climbed back to 63 percent. Bloomberg’s Dollar Spot Index, which tracks the U.S. currency against 10 major peers including the euro and yen, has surged 20 percent since the middle of 2014. The gains stalled recently, sending the index down more than 3 percent in the three weeks through April 3, as Federal Reserve officials tempered investors’ expectations about the pace of rate increases. Central banks added to their yen holdings in order to keep the ratio of Japan’s currency constant in dollar terms as it tumbled against the U.S. dollar at the end of 2014, according to analysis of International Monetary Fund data. The yen’s share of global reserves is about 4 percent in terms of the dollar. Inflation has been moderating for close to a year, with the BOJ’s preferred price gauge flatlining in February, even after policy makers expanded unprecedented stimulus that has weakened the yen. Declines in Japan’s currency stalled near 122 per dollar this year, while economists estimate the yen must weaken to 140 per dollar in order for Kuroda to meet the 2 percent price-increase goal. The yen is 32 percent undervalued against the U.S. dollar based on consumer prices, the most after Sweden’s krona among major currencies, according to a Bloomberg gauge of purchasing power parity. That compares to a discount of 6.8 percent for the euro, while sterling is more than 6 percent overvalued.

Daily Technical Analysis

USD/CAD (4 Hours)

The superior trend of this currency pair is strong bullish. An undecided range since February built a significant support line around 1.24, similar as the USDJPY. Today’s U.S. news might be already decisive if the price is able to break out and continue the long-term trend or the support line is broken sustainably. The arising triangle might be very interesting to traders who maintain position in USDCAD.

Support & Resistance (4 Hours)