Last weekend, a group meeting involving the Cyprus government, the European Commission, the ECB, and the International Monetary Fund concluded with an announcement that Cyprus needed bailout as it was on the brink of a financial crisis.
In an effort to stave off financial collapse in the small Mediterranean island nation, officials along with the Cypriot government initially agreed to enforce a plan wherein part of the bailout funds would come from graduated bank deposit levies. This original plan has been vehemently opposed by local officials, and Cypriots took to the streets to protest the “legal robbery” looking to be imposed upon them. Employees of affected banks also joined the street demonstrations to express rejection of plans to restructure several Cypriot banks, including the two largest banks in the island nation. Eurozone finance ministers and Cypriot officials have been taking emergency meetings and conference calls as they scramble to create a resolution to the ongoing crisis. Recent discussions revolve around plans which include institution of capital controls, bank levies, and bank restructuring, among others.
There are now unconfirmed reports that a bailout deal has been struck between the troika and the Cypriot government officials; bailout deal deadline remains on Monday.
Gold has made some progress as it printed a weekly close above the $1,600 level for the very first time in five weeks. Looking at the daily chart, we would see $1,616 effectively keeping a lid on price all throughout this week. Price still needs to come higher and break the near-tem resistance at $1,620 unless sellers prefer to revisit the $1,550-70 area initially.
Oil also made a key weekly close this week, while creating its third bullish weekly close. Price closed well above the $93 level and even made a brief thrust above $94 during the first two days. Since the downside has been supported quite well, buyers can now attempt to take price above $95 to reach the 2012 highs seen in late-January.
EURUSD had a very rough start to the week as it gapped down nearly 170 pips after closing the prior week at 1.3074. This was caused by weekend news that Cyprus will impose levies on bank deposits across the country. The pair meandered around a 160-pip range throughout the week, trading in the 1.2900s for the most part. On Friday, the pair traded higher, reached a 1.3009 high before closing the week a few pips below the key 1.3000 level. Bulls must try to get back to the 1.3100s this coming week to help resume their campaign.
USDJPY gapped down in harmony with EURUSD’s slide on Monday. The pair’s inability to hold above 96 remained on the table and sellers pounded prices lower again this week. The drive lower led to a bearish weekly close, which would now permit sellers to take some revenge and fight for a move towards 90.
GBPUSD followed through from its impressive recovery the other week, now stalking the key 1.5300 level. The week started pretty rough as the market digested the news about Cyprus bank levies last week. The pair was not spared of this negative development and it ranged for three days before it resumed its climb. With a week high at 1.5245, the pair is just a few pips a way from its near-term target. What’s critical is the bullish momentum as price moves through the 1.5300 level – bulls must make a concerted push higher.
The Week Ahead
As usual, Monday will start off with a relatively quiet tone. Only notable releases are UK’s BBA Mortgage Approvals, and speeches from SNB Governor Board Member Danthine, FOMC’s Dudley and Federal Reserve Chairman Bernanke.
On Tuesday, there will be New Zealand’s Trade Balance, speech from RBA Governor Stevens, UK’s Nationwide HPI and CBI Realized Sales, US S&P/CS HPI, US Durable Goods data, US New Home Sales, and US CB Consumer Confidence.
Wednesday will get busier with New Zealand’s ANZ Business Confidence, RBA’s Financial Stability Review, Germany’s Gfk Consumer Climate, UK Current Account, UK Final GDP, Switzerland’s KOF Economic Barometer, Euro-area Retail Sales, Canada’s CPI, and US Pending Home Sales.
For Thursday, the market will witness the release of Australia Private Sector Credit, Japan Retail Sales, Germany’s Unemployment Change and Retail Sales, Euro-area M3 Money Supply, Euro-area Retail PMI, Canada’s GDP and RMPI, US Final GDP, US Chicago PMI, and US Unemployment Claims.
Friday will be very quiet as banks will be closed in New Zealand, Australia, Germany, Switzerland, the UK, and Canada to observe Good Friday. Japan will be out with CPI, Household Spending, Unemployment Rate, and Housing Starts. US will publish Personal Spending, Personal Income, Core PCE Price Index, and the revised reading of University of Michigan’s Consumer Sentiment.