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Dukascopy Forex Overview: 26-03-2012 - Afternoon

Dukascopy Bank analytic desk report
Published: 26/03/2012 18:20
Dukascopy Fundamental Analysis
EUR
17-nation currency advanced versus Japanese Yen on speculations Europe may combine two bailout funds to terminate debt crisis. Euro added 0.3% versus Yen to JPY 109.60 and traded at USD 1.3255 on Friday. Currently EUR/JPY is trading at JPY 109.48 and EUR/USD is trading at 1.3259.

USD
US pending home sales dropped sharply in February (-0.5% reading despite a positive +1.0% forecast). This was a severe fall after a 2.0% rise a month before; analysts believe that this trend was caused by continuous turmoil in the global economy.

GBP
British FTSE 100 recovered from last week's drop and edged higher on Monday  led by energy stocks. Heavyweight BG Group provided the main support for the index. Oil and gas provider surged 1.8% after company announced it discovered gas resources in its 4th well in Tanzania. Stocks of Aberdeen Asset Management rallied 3.6% after reporting a 6% increase in its asset value since December 2011. FTSE 100 currently is trading 0.72% or 42.49 points higher at 5,898.84.

CHF
The official SNB exchange rate for EUR/CHF is 1.2053 today; yield on 10-year Swiss Confederation bonds decreased to 0.90%. 3-month LIBOR CHF stands at 0.11%, and is within the target range of 0.00-0.25%. Swiss SMI stock index has lost 0.74% since the opening bell, and is currently fluctuating around 6283 points.

JPY
Japan and Canada have embarked on negotiations aimed at setting up free trade zone between two countries. However, experts claim it would be difficult to agree for two countries as Japan continues to protect its agricultural and farming sector from foreign competition. At the same time, Japan is large importer of Canada's commodities as coal, copper and food products. Canada mostly purchases industrial goods from Japan.
Dukascopy Technical Analysis
EUR/USD
Daily maximum: 1.3338
Daily minimum: 1.3191
The pair tumbled to 1.3191 in the morning and sharply retraced back breaking the resistance at 1.3290. EUR/USD may have a short-term correction to the previous level around 1.3290. Daily Resistance: 1.3290; 1.3310; 1.33533/43. Daily Support: 1.3250; 1.3208; 1.3147. Daily Bias: Strongly bullish.

EUR/JPY
Daily maximum: 110.54
Daily minimum: 109.18
The pair decreased smoothly to the support level around 109.18/28 and then bounced off, breached the resistance at 109.85 and moved to the 110.23. EUR/JPY is currently consolidating in the range between 110.06 and 110.27 and feasibly will try to test resistance around 110.45. Daily Resistance: 110.45; 111.09, 111.43. Daily Support: 109.85; 109.10/21; 108.60. Daily Bias: Bullish.

GBP/USD
Daily maximum: 1.5956
Daily minimum: 1.5800
The pair has breached the first daily resistance level at 1.5915 and now is heading towards 1.5963. In case the resistance level at 1.6018 is violated, the pair is expected to extend its rally. Daily Resistance: 1.5963; 1.6018; 1.6059. Daily Support: 1.5757; 1.5708; 1.5651. Daily Bias: Strongly bullish.

USD/JPY
Daily maximum: 83.00
Daily minimum: 83.55
The yen rallied on Monday versus the greenback supported by better than expected data from the euro zone. The pair is expected to bounce from 83.39 and then fall to support level at 81.87. Daily Resistance: 83.39; 83.83; 85.43. Daily Support: 81.87; 81.43; 80.90. Daily Bias: Strongly bearish.

USD/CHF
Daily maximum: 0.9136
Daily minimum: 0.9033
The pair fell below the daily pivot point at 0.9094, adding to bearish sentiment. It is now heading to the support level at 0.8985 which, if violated, will open the road towards 0.8954. Daily Resistance: 0.9167; 0.9195; 0.9316. Daily Support: 0.8985; 0.8954; 0.8941. Daily Bias: Strongly bearish.
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Expert Commentary
"It will take at least 10 years for the Yuan to be a global currency"
For more than three years, China has been developing a strategic plan to globalize the Yuan. It was announced last week , that China is planning to extend the Yuan-denominated loans to BRICS countries, which would be a significant step towards increasing the "people's currency" role in cross-border trade settlement. >>

"For EUR/USD we have a target of 1.25 on a short-term horizon, and for the end of September ‘12 we expect EUR/USD to reach 1.30"
C. Hecht, Currency Strategist at Commerzbank, evaluated the greenback’s performance and gave a forecast for the US Dollar against the basket of currencies for a short and long term. >>

"The Japan’s trade deficit effect on FX will be limited. Therefore, the Yen weakness will reduce in the second half of the year"
Today Dukascopy interviewed the Head of FX Strategy at JP Morgan Chase & Co in Singapore concerning a forecast for ASD/JPY, EUR/JPY and USD/JPY. >>
Press Review
Europe
German Ifo Business Confidence Unexpectedly Increases
German business confidence unexpectedly rose to an eight-month high in March, suggesting Europe’s largest economy will return to growth even as the sovereign debt crisis curbs euro-area demand for its exports.

USA
Bernanke: US job market improving but still far from normal with further gains uncertain
Chairman Ben Bernanke says the U.S. job market remains weak despite three months of strong hiring and that the Federal Reserve’s existing policies will help boost growth.

Asia & Pacific
China Soft Landing May Be Hard for Commodity Exporters
The good news: China’s government will engineer a soft landing. The bad news: Even a soft landing is painful for industries that have become dependent on the world’s fastest-growing major economy as their main profit engine.
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Market Research
Currency Index & Volatility
Over the last five trading days the Euro has appreciated by 0.3% relative to the other major currencies. The first half of the previous week the single currency was rather bullish and gained 0.55%. The second half, however, the Euro performed poorly, as its currency index dipped to 99.75 at some point (10 am GMT, Mar 22). Nonetheless, risk-on sentiment seemed to be strengthening thereafter.
Dukascopy Bank Sentiment Index
The current and six-month global economic outlooks improved for a second consecutive month in February. Gauges assessing the economic expectations advanced to 0.48 and 0.52, according to a poll conducted by Dukascopy Bank SA. The three-year economic outlook rose to 0.66 from 0.64 in January.
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Global Stock Market Review
S&P
After three straight red sessions S&P 500 index retreated and traded slightly higher on Friday supported by financial and energy shares. US benchmark added 0.31% or 4.33 points and finished at 1,397.11.

Dow Jones Industrial Average
Dow Jones Industrial Average index edged higher on Friday though the gains were limited as data showed the sales of new homes in US unexpectedly fell 1.6% in February. Blue chip index appreciated 0.27% or 34.59 points and settled at 13,080.73 with 19 of 30 shares posting gains.

DAX 30
German DAX index rallied on Monday as Ifo institute reported German business confidence rose more than expected in March, reaching 8-month record high. BASF SE jumped 2% after Warburg upgraded the stock from hold to buy.
Commodity Overview
Precious Metals
Precious metals rebounded on Friday after posting losses for the previous days. Broadly weaker US Dollar and stronger equities both created a fresh stimulus for the precious metals rally. Gold managed to climb from the 10-week low after the ECB increased its bond purchases.
 
Industrial Metals
Industry metals moved higher on Friday amid firmer equities and softer US Dollar. The commodity group took a break in its tumble caused by pessimistic manufacturing data releases from the Euro Zone and China. Moreover, lower risk-aversion after the ECB increased its bong purchases from peripheral countries of the Euro Zone added to gains of the base metals pack.
 
Energy
Energy commodities apart from heating oil ended the week on the positive note, being bolstered by supply concerns and demand hopes. From the supply side, Iran reported a drop in oil exports; such oil giants as French Oil already halted totally oil imports from Iran.
 
Agriculture
Rural commodities except for sugar followed an upward trend on Friday amid weaker US Dollar and risk of crop estimations downgrades in South America. 
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Trade Pattern Idea
Emerging Pattern: EUR/JPY
EUR/JPY slowed near resistance level around 109.05 and has formed a rising wedge pattern on 4H chart. The formation has 76% quality and 66% magnitude within 173 bars. 

The pair continued its bullish trend and bounced off the resistance at 108.48. The pattern started in the middle of February, and it points out the reliability of the pattern
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Economic Research
Commodity Currencies: CAD
The Dukascopy Bank research department is launching a series of research devoted to various traders’ perceptions and general myths that are popular among investors. We start the series with research on commodity currencies (currencies of countries rich in natural resources, with the Canadian, the Australian, and the New Zealand dollars being the most liquid of them), as they are believed to be highly linked to the movements in physical commodity prices.
 
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Disclaimer:
This overview can be used only for informational purposes. Dukascopy Bank SA is not responsible for any losses arising from any investment based on any recommendation, forecast or other information herein contained.

 


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