Month: March 2010

By GCI Forex Research

Fundamental Outlook at 1500 GMT (EDT + 0500)

€

The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3475 level and was capped around the $1.3570 level. The common currency came off on renewed fears regarding Greece’s fiscal crisis amid worries there may be insufficient political agreement to implement a financial aid package for the country.  A German finance ministry official reported Germany and France agree on supporting an International Monetary Fund rescue package of Greece, a contrast with other reports that officials are far from an agreement about financial assistance.  Greece needs to sell about €10 billion in new bonds in coming weeks to refinance maturing debt.  Germany is also said to favour a proposal that would stiffen the penalties for European Union members that do not maintain fiscal discipline.  Data to be released in the eurozone tomorrow include March PMI and January industrial new orders.  EMU-16 leaders will convene this week to discuss the Greeek situation and the common currency could get a boost if a comprehensive solution is announced for Greece.  Incoming ECB Vice President Constancio said a package for Greece will be a “normal” loan and not a bailout.  In U.S. news, Chicago Fed Evans last night indicated he would not be surprised if the Fed’s accommodative monetary policy remained in place through 2011, clearly putting him in the “dovish” camp.  Atlanta Fed President Lockhart noted the U.S. has a “privileged” position because the dollar is the global reserve currency but warned the U.S. should not assume that will remain permanent.  Many data were released in the U.S. today.  February existing home sales were off 0.6% m/m to 5.02 million annualized units, a significant improvement from the prior print of -7.2%.  The house price index also improved to -0.6% m/m from the revised tally of -2.0% m/m.  Additionally, the March Richmond Fed manufacturing index improved to +6 from the prior reading of +2.  Durable goods and new home sales data will be released tomorrow.  Philadelphia Fed President Plosser called on the Fed to adopt a less discretionary rate-setting framework.  Euro bids are cited around the US$ 1.3335 level.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥90.45 level and was supported around the ¥90.05 level.  Japanese financial markets reopened overnight and the yen was mixed across the board.  Minutes from Bank of Japan Policy Board’s were released overnight and they indicated “Some members were of the view that upside and downside risks were becoming balanced” whereas others observed “considerable downside risks to the economy.” Bank of Japan last week expanded monetary policy further, doubling a three-month lending facility to ¥20 trillion amid strong political pressure to ease policy further.  The move is expected to have a limited impact on liquidity and was probably implemented to try and improve market sentiment.  Policymakers in February also expressed concern with escalating deflationary pressures and the perception that China may be experiencing an asset bubble.  Data released in Japan overnight saw Q4 financial household assets climb 2.5% y/y.  Deflationary pressures are expected to remain strong through at least 2011.  Dealers continue to cite repatriation flows back into Japan ahead of the fiscal year end next week.  The Nikkei 225 stock index lost 0.47% to close at ¥10,774.15. U.S. dollar offers are cited around the ¥94.75 level.  The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥122.60 level and was supported around the ¥121.75 level.  The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥135.20 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥85.45 level. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8264 in the over-the-counter market, down from CNY 6.8267.  People’s Bank of China Governor Zhou reported the U.S. and China may have hold bilateral talks to discuss exchange rates, adding political “very high profile noise” isn’t “helpful.”  Zhou added “For China, we also have a tremendous task to create more jobs.”  Traders are starting to focus on a U.S. government report due 15 April that could potentially identify China as a “currency manipulator.”  February industrial profits data will be released this week.

₤

The British pound depreciated vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.4970 level and was capped around the $1.5110 level.  Bank of England announced new plans today involving long-term repo transactions designed to increase the provision of liquidity through accepting a wider range of collateral.  Data released in the U.K. today saw the March CBI distributive trades survey decline to +13 from +23.  Also, BBA mortgage approvals came in stronger-than-expected at 35,200 while February core consumer price index increased 2.9% y/y, down from January’s print of +3.1% y/y.  At the headline level, CPI was up 0.4% m/m and 3.0% y/y.  Cable bids are cited around the US$ 1.4455 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the £0.9015 level and was supported around the £0.8965 level.

CHF

The Swiss franc weakened vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0635 level and was supported around the CHF 1.0575 level.  Swiss National Bank President Hildebrand reported the central bank will “decisively” act against “excessive” franc strength, noting the central bank can intervene to a “very large extent.”  Swiss National Bank yesterday published its quarterly economic report today and noted it will continue to “act decisively” to prevent an “excessive” appreciation of the franc.  In recent days, many dealers speculated the SNB would be less likely to sell francs for euro given the recent improvement in the U.S. economy and the cross has fallen to fresh multi-month lows as a result. SNB today indicated it expects the Swiss recovery to be “moderate and fragile.”  Data released in Switzerland last week saw Q4 industrial production rise 6.4% q/q and decline 1.1% y/y while the February trade surplus declined to CHF 1.29 billion from CHF 2.42 billion.  The euro came off vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.4325 level while the British pound moved higher vis-à-vis the Swiss franc and tested offers around the CHF 1.5950 level.

Forex Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

By CountingPips.com

U.S. existing-homes sales data declined for the third straight month of February, according to the monthly report produced by the National Association of Realtors (NAR). The NAR report showed that existing-home sales including single family homes, co-ops and townhouses fell by 0.6 percent in February to a seasonally adjusted annual rate of 5.02 million units. January’s existing-homes sales data had decreased by 7.2 percent to a 5.05 million home rate while December sales dropped by over 16 percent. Despite the monthly decline, February’s existing-home sales have increased by 7.0 percent an annual basis over the February 2009 level.

Market forecasters had predicted the sales data would rise by 1.1 percent in February to a 5.00 million unit sales pace.

NAR chief economist Lawrence Yun commented in the report about the lower sales figures, “Some closings were simply postponed by winter storms, but buyers couldn’t get out to look at homes in some areas and that should negatively impact near-term contract activity.”

“Although sales have been higher than year-ago levels for eight straight months and home prices are much more stable compared to the past few years, the housing recovery is fragile at the moment.”

Sales in the Northeast increased by 2.4 percent in February while the Midwest sales rose by 2.8 percent. The West saw its existing-home sales fall by 4.7 percent and sales dipped 1.1 percent in the South. On an annual basis, the Northeast leads the increases above the February 2009 level with an increase of 12.0 percent with the South (6.9%), West (3.4%) and Midwest (8.8%) all showing rises on an annual basis.

The median sales price for existing homes declined to $165,100 on an annual basis in February, a decline of 1.8 percent from the February 2009 level. Total housing inventory increased in February by 9.5 percent to a total of 3.59 million homes, a 8.6-month supply.

FOREX: US Dollar trades mixed in fx markets, Stocks gain

The US Dollar has been mixed in forex trading today while the U.S. stock markets have advanced higher. The American currency has increased today versus the euro, British pound, and Japanese yen while falling against the Canadian dollar and Australian dollar, according to currency data by Oanda at 4:28 pm EST in the U.S. session. The New Zealand dollar and Swiss franc are trading close to unchanged against the USD at time of writing.

The US stock markets, meanwhile, climbed higher today with the Dow Jones advancing by 102.94 points, the Nasdaq increasing 19.84 points and the S&P 500 up by 8.36 points.  Oil has edged higher by $0.30 to trade at $81.90 while gold has advanced by $4.20 to trade at the $1,103.50 per ounce level.

AUD/USD 1-Hour Chart – The Australian dollar gaining slightly versus the US dollar in forex trading today. The AUD/USD has bounced back from yesterday’s dip to the 0.9084 level and now trades above the 61.8 fibonacci retracement level on the move from 0.9251 to 0.9084.

By Fast Brokers – The Aussie is moving higher right now in reaction to today’s U.S. data set.  U.S. Existing Home Sales printed about in line with analyst expectations, yet remain well below desired levels to establish a lasting economic recovery.  The expected figure is proving positive for the risk trade across the board since this implies that the Fed may need to keep its monetary policy loose.  An extension of dovish monetary policy in the U.S. bodes well for the Aussie due to the RBA’s comparatively hawkish monetary stance.  China is standing firm on its bid to keep the Yuan pegged, also a positive development for the Aussie since a weak Yuan helps fuel China’s recovery while boosting the nation’s demand for Australia’s commodities.  Meanwhile, all eyes remain fixated on the EU as European leaders play tug of war in regards of how to deal with Greece.  Although a resolution is looking less likely as this week’s EU meeting approaches, if a solution does emerge this could be a boon for the Aussie and the risk trade as a whole.  Britain will also release its budget and investors will be looking for a conservative plan to keep the UK’s deficit from ballooning further.  Australia will be quiet on the data wire for the remainder of the week, possibly leaving the Aussie’s performance correlated with the risk trade.  Meaning investors should keep their eyes on headlines out of Europe along with upcoming EU and U.S. data points, including tomorrow’s EU Flash PMI data set along with U.S. New Home Sales and DGO.

Technically speaking, the Aussie is knocking on the door of our downtrend line and an eclipse could yield a retest of March 18th highs.  That being said, the Aussie still has some medium-term downtrend lines hanging above along with 3/17 highs.  As for the downside, The Aussie has our uptrend line serving as a technical cushion along with intraday and March 22nd lows.  Additionally, the psychological .91 and .90 level could serve as solid technical cushions should they be tested.

Price: .9182
Resistances: .9191, .9209, .9224, .9234, .9251
Supports: .9157, .9136, .9127, .9120, .9106, .9091
Psychological: .91, .90, 2010 highs

(click chart to enlarge)

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regarded neither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Fast Brokers – The USD/JPY is continuing its sideways action while floating around the highly psychological 90 area.  Uncertainty in the EU hasn’t had much of an impact on the USD/JPY thus far as loose monetary policies from both the BoJ and Fed offset one another.  While investors may expect the USD/JPY to decline with pullbacks in the risk trade, the currency pair has held firm since the BoJ maintains its loose monetary policy stance while the Fed tightens a tad.  Underperformance in Japan’s economy coupled with a dovish stance has given investors little reason to buy up the Yen over the Dollar for safety.  Meanwhile, weakness in the risk trade seems to be capping upward movements in the USD/JPY since they tend to have a positive correlation.  Although consolidation in the USD/JPY has carried on for quite some time, investors shouldn’t become complacent since the currency pair is prone to periods of accelerated activity.  Japan will release Trade Balance data during tomorrow’s trading session followed by the UK’s budget and key data from the EU and U.S.  Investors will likely pay particular attention to U.S. durable goods data since consumption of lasting products can give us a barometer in regards to the health of Japan’s manufacturing industry.

Technically speaking, the USD/JPY faces multiple downtrend lines along with intraday, 3/18, and 3/12 highs.  Meanwhile, the highly psychological 90 area could continue to have an influence over the USD/JPY’s movements for the near-term.  As for the downside, the USD/JPY has multiple uptrend lines serving as technical cushions along with intraday and 3/18 lows.  .

Present Price: 90.26
Resistances: 90.37, 90.47, 90.57, 90.71, 90.79
Supports: 90.16, 90.12, 90.06, 89.99, 89.94, 89.84
Psychological: 90, March highs and lows

(click chart to enlarge)

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Fast Brokers – Gold has recovered from intraday lows, avoiding a retest of Tuesday lows and climbing back to its highly psychological $1100/oz level in the process.  With gold hovering around $1100/oz, the precious metal is sending a message that the markets could be at a critical juncture.  The EUR/USD is also trading around 1.35 and the Cable 1.50.  Hence, psychological forces are in play across the board with key EU and U.S. economic data on the way.  Additionally, the UK will release its long-awaited budget tomorrow followed by the EU’s highly anticipated meeting at the end of the week.  Therefore, there are plenty of potential psychological influences in the mix, with Greece in focus.  Although a plan for financial assistance is becoming less likely by the day, should the EU surprising by production a solution this could be a boon for the risk trade, gold included.  However, weak economic data coupled with a disappointing EU meeting could weigh down on gold and favor the Dollar further.  Hence, investors should pay close attention to headlines and the data wire for upcoming developments.  Meanwhile, the highly psychological $1100/oz level could continue to have an influence on the precious metal until the markets send a new directional message.

Technically speaking, gold has intraday and Tuesday lows serving as technical cushions along with the highly psychological $1100/oz area.  As for the topside, gold faces multiple downtrend lines along with intraday, March 22nd and March 3rd highs.

Present Price: $1099.70/oz
Resistances: $1101.50/oz, $1103/oz, $1104.90/oz, $1106.20/oz, $1108.50/oz
Supports: $1098.30/oz, $1096.30/oz, $1094.90/oz, $1094.10/oz, $1092.30/oz
Psychological: $1100/oz, March highs and lows

(click chart to enlarge)

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regarded neither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Fast Brokers – The Cable has recovered nicely from intraday lows and is presently climbing higher with the broad-based risk trade.  The Cable has foregone a retest of Tuesday lows thus far while its psychological 1.50 area has proven resilient.  The Cable has locked backed into its March trading range in the process with the UK budget coming tomorrow.  Though investors aren’t expecting anything earth shattering tomorrow due to upcoming parliamentary elections, if Darling should manage to trim the UK budget this could boost the Cable since investors have become increasingly anxious concerning rising debt levels.  Meanwhile, investors continue to focus on the EU as leaders jostle for position in regards to whether the union should offer Greece financial assistance.  Greece could set an example for how the EU deals with other debt-laden European nations, so the debate has becomes heated as most investors know.  What happens in the EU could influence the risk trade as a whole, so investors should keep a close eye on what comes out of this week’s EU meeting.  Data wise, UK CPI printed a hair below analyst expectations, yet remains at elevated levels.  Hence, the BoE will likely remain somewhat concerned about inflationary pressures in the UK, a positive for the Cable.  BBA Mortgage Approvals improved while CBI Realized Sales disappointed.  Therefore, today’s UK data paints a mixed picture.  The U.S. and EU will print key data tomorrow along with the UK’s budget release.  Hence, tomorrow could prove to be an active trading session.

Technically speaking, the Cable still has multiple uptrend lines serving as technical cushions along with intraday, 3/22, and  3/10 lows.  Additionally, the psychological 1.50 could continue to serve as a solid technical cushion should it be retested.  As for the topside, the Cable faces multiple downtrend lines along with 3/22 and 3/12 highs.

Present Price: 1.5074
Resistances: 1.5087, 1.5105, 1.5130, 1.5147, 1.5169, 1.5193
Supports: 1.5040, 1.5022, 1.5006, 1.4994, 1.4977, 1.4957
Psychological: 1.50, March lows

(click chart to enlarge)

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regarded neither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Fast Brokers – The EUR/USD is registering a solid pop as the risk trade heads higher in reaction to the U.S. data set.  Existing Home Sales printed about in line with expectations, leading to slight speculation that the Fed will have to keep its monetary policy loose, a positive for many major Dollar pairs.  Belgium’s Business Climate figure also topped expectations, a positive data figure much in need for a reeling currency pair.  The EUR/USD is still being weighed down by the battle of words taking place in the EU.  Everybody has been taking sides the last couple weeks with Greece stuck in the crossfire.  Although a financial assistance resolution for Greece seems is becoming less likely this week, if the EU should bring something to the table this could cause a short-squeeze and benefit the risk trade as a whole.  Divergence among EU leaders has taken a psychological toll on the Euro with even the relevance of the EU being thrown into question by some.  However, we suggest investors not get too carried away and take a wait and see approach in regards to the EU’s plan for Greece and the rest of the union’s debt-laden nations.  In the end it seems every nation is jockeying for position to get what they desire out of any pending resolution, as we witnessed between the U.S. Congress during healthcare negotiations.  However, Greece does have some debt issuance coming in a month so a decision will have to be made sooner rather than later.  Meanwhile, the UK will release its fiscal budget tomorrow and this could have an impact on the risk trade as a whole.  Though nothing drastic is expecting with parliamentary elections on the way, should the UK present a lighter than expected budget this could aid the risk trade and abate concern about the UK’s ballooning deficit.  The EU will also release Germany’s Ifo Business Climate figure tomorrow along with the closely watched Flash PMI data set.  Positive EU data could help cool some of the flames emitting from Greece, whereas negative data could drag the EUR/USD lower.  The U.S. will also print DGO and New Home Sales data, meaning tomorrow could prove to be an active trading session.  For the time being the EUR/USD seems to be finding comfort in its psychological 1.35 area.

Technically speaking, the EUR/USD faces multiple downtrend lines along with intraday 2/23, and 3/19 highs.  As for the downside, the EUR/USD has several uptrend lines serving as technical cushions along with 3/22 and 3/5 lows.  Meanwhile, the psychological 1.35 area could continue to serve as a solid technical cushion should it be tested.

Present Price: 1.3535
Resistances: 1.3568, 1.3605, 1.3626, 1.3654, 1.3628
Supports:  1.3534, 1.3504, 1.3484, 1.3467, 1.3476, 1.3440
Psychological: March and February Lows, 1.35

(click chart to enlarge)

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regarded neither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By CountingPips.com

Canada’s Leading Indicators rose for the ninth straight month in February, according to a  report from Statistics Canada today. The Leading Indicator Index, which measures future economic activity, increased by 0.8 percent in February following an increase of 0.7 percent in January. The February rise was just below market forecasts looking for an increase of 0.9 percent. The index has now increased every month going back to June 2009.

Nine out of ten of the measured sectors that make up the leading indicator index showed increases for the month. Durable goods orders and the housing index index were leading sectors for the month with gains of 6.2 percent and 1.7 percent, respectively. The stock market index rose by 0.4 percent in February while furniture and appliance sales sales gained by 1.2 percent.

Other notable gains were the US Conference Board indicator which rose by 0.8 percent and business & personal services employment which advanced by 0.5 percent for the month. The lone declining indicator for the month was the average workweek index which fell by 0.8 percent.

FOREX: Canadian Loonie mixed in Trading

The Canadian loonie dollar has been mixed today in the currency markets versus most of the major currencies. The Canadian currency has been increasing versus the euro and British pound  while trading lower versus the Japanese yen, U.S. dollar and Australian dollar after paring some earlier gains, according to currency data from Oanda. The loonie is trading virtually unchanged against the New Zealand dollar.

USD/CAD 1-Hour Chart – The U.S. dollar has been gaining slightly so far today against the Canadian loonie in some up-and-down trading action. The USD/CAD pair currently trades under the 1.0200 level after rising above this threshold in trading yesterday and earlier today, but both times being rejected lower. The pair trades right at the 200-hour moving average (in black) and in the short-term, the USD/CAD looks to make a move higher if the pair can maintain its position above the 200-hour moving average.

Forex Market Review by Finexo.com

Past Events
• ECB President Trichet Spoke
• GBP Bank of England Governor King Spoke

Upcoming Events
• USD Existing Home Sales (1400 GMT)
• GBP Consumer Price Index (0930 GMT)
• GBP Budget Announcement Tomorrow (1230 GMT)

Market Commentary

Yesterday saw the U.S. Dollar gain against all of its major counterparts except for the Japanese Yen as German Chancellor Angela Merkel told investors they shouldn’t expect a European Union summit due to be held in Brussels on Thursday and Friday of this week to agree on assistance for Greece.

The US Dollar gained 0.40% against the Euro overall yesterday, with the Euro closing at $1.3566. Against the Pound the US Dollar rose by 0.76% with Sterling closing at $1.5109. The US report on existing home sales is due to be announced later today. Economists are predicting that the figure will fall for the third month in a row as unemployment remains close to 10%. Existing homes account for almost 90% of the housing market. It is believed that the extension and expansion of a federal tax credit for housing has not yet had the desired effect as the labor market remains depressed.

Across the water in Europe European Central Bank President Jean-Claude Trichet said yesterday that aid should only be given to Greece if it will include an element of stabilization for the 16-country Euro Zone as a whole. He also said it was of the upmost importance for other Euro Zone members to maintain fiscal discipline.

The the Greek Central Bank said yesterday that Greece’s economy is in a “vicious circle” and this year it will contract more severely than the government says. The Bank of Greece said economic output in 2010 will fall by 2%, worse than the government’s prediction of between 1.2% and 1.7%. The bank says the recession will be worse due to planned public spending cuts. The bank said that it approves of the government’s strategy to bring down the country’s budget deficit, but that the impact will be worse than first thought.

“The Greek economy has fallen into a vicious circle with only one way out: the drastic reduction of the deficit and debt,” the Bank’s annual monetary policy report says. The report warned that the Euro Zone’s economic recovery remains fragile, having relied to a large extent on fiscal stimulus, which must gradually be reversed as it is leading to large budget deficits.

Greece’s budget deficit last year was 12.9% of GDP, more than four times greater than the EU allows. Germany has irritated some of its European partners with its opposition to a financial aid package to help Greece overcome its debt crisis, believing that Greece can solve the problem itself.

Elsewhere in the Euro Zone, Germany’s coalition government is reportedly planning a banking levy to protect taxpayers from the costs of bank bail-outs. Leading conservative politician Volker Kauder said the money would stop banks from relying on state-funded rescues.
The levy would raise “billions of Euros” from the financial sector, he has predicted. The German government dug deep into its treasury coffers to provide a €500 billion ($679 billion) rescue package to shore up the banking system late in 2008. The new proposal seems to be designed to dissuade banks from taking risks in future which would see them begging for more government hand-outs.

The International Monetary Fund (IMF) has been asked by the G20 group of wealthiest countries to examine how banks can best contribute to the costs of insuring themselves against failure. But so far countries have adopted a piecemeal approach to the issue.

In the UK yesterday economists warned of a “sluggish” recovery in the economy this year, ahead of tomorrow’s Budget. The Confederation of British Industry said it expected the economy to grow by 1% in 2010, with the recovery remaining subdued until the middle of next year. The government forecasts growth of 1.25% this year and 3.5% for 2011. However the Chancellor, Alistair Darling, may revise those predictions in the Budget tomorrow.

After the report was released the Pound weakened further against both the US Dollar and the Euro, it closed trading down 0.36% against the Euro at EUR 0.8978.

British Consumer Price Index data is due to be released later today. Governor King from the Bank of England said yesterday that first quarter inflation was likely to be in line with the Banks forecast of 3.1%

Chancellor Alaistair Darling has reiterated there will be “no giveaways” ahead of the general election. The budget is expected to focus on encouraging private sector investment and securing long term economic growth. The government plans to halve the budget deficit – which is one of the highest in Europe and is expected to hit about 12.6% of GDP this financial year, well above the European Union threshold of 3% – over the next four years.

The Pound has had its worst annual start in the currency market in 13 years, dropping 7% against the US Dollar since January. The currency has been weakened by uncertainty regarding the outcome of the general election which Prime Minister Gordon Brown must call by June. The government was forced to borrow heavily during the recession resulting in one of the highest deficits in Europe. Mr. Darling has said that while there had been signs recently that the economy was improving, with unemployment falling and government borrowing lower than forecast there was still a lot of uncertainty.

He said “the mood of the times is not for giveaways. People are not daft, they know perfectly well we need to get borrowing down and secure (economic) recovery”.

The uncertainty about who will win the election and whether there will be a hung parliament has resulted in a bearish trend in Sterling. A minority government is looking increasingly probable according to recent UK opinion polls and sentiments are sharply divided between the Labor and Conservative parties on how to achieve the necessary spending cuts.

Elsewhere the Canadian Dollar fell for a third day, the longest losing streak since January as crude oil prices continued to fall. The loonie rose in 12 of the last 16 sessions to reach C$1.0062 last week, the closest to parity with the U.S. dollar since 2008. It has risen 3% this month for the second best performance among the 16 most traded counterparts against the US Dollar. South Africa’s Rand which also relies on commodities for export revenue preformed best.

Forex Market Review & Analysis by Finexo.com

Disclaimer: Trading the foreign exchange (Forex) carries a high level of risk, and may not be suitable for all investors.

By Yan Petters – Over the past 6 weeks, the EUR/USD pair had 3 failed attempts to drop below the 1.3430 level. However today seems to be the day that we will see a 1-year low as several technical indicators provide clear bearish signs.

• The chart below is the EUR/USD 4-hour chart by ForexYard
• The technical indicators used are the Bollinger Bands, the Slow Stochastic, the MACD and the Relative Strength Index (RSI).
• There is a very distinct bearish channel formed on the chart.
• A bearish cross of the Slow Stochastic suggests that the bearish channel is likely to be extended.
• The MACD and the RSI are both pointing down, indicating that the bearish momentum is still very strong.
• The next support level is located at the 1.3450 price.
• If the pair will manage to cross this level, it is likely to reach the 1.3430 level – which will mark a year low.
• Traders should notice that if the pair will reach below the 1.3420 level, this has potential to initiate a sharp slide.

Forex Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

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