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Currency Trends & Insights

Analysis

G-7 OK’s Yen Decline amid Close Attention of FX Rates

During the latest meeting between Group of Seven central bank heads and finance ministers, consensus has been expressed concerning tolerance of the latest Yen weakness. G-7 policymakers stated that the latest recovery developments in Japan and the current exchange rate movements were at the center of their attention in the meetings.

The Yen has slid 15 percent against the US Dollar and is now at its weakest in the last four years. “Everybody watches exchange rate developments,” noted German Finance Minister Wolfgang Schaeuble. “We had a very intense discussion about Japan with our Japanese colleagues.” For his part, BOJ Chief Haruhiko Kuroda expressed that “easing will contribute to achieving our domestic objective of ending nearly 15 years of deflation,” and reiterated that the monthly bond buying is meant to achieve a 2 percent inflation target by 2015. Kuroda further noted that the G-7’s understanding of his policy strategy has increased.

In other news, Canada’s Building Permits increased by 8.6 percent in March following a 1.5 percent gain in the previous month.

Reserve Bank of Australia eased rates to 2.75 percent from 3 percent, while Bank of England maintained rates at 0.50 percent and Asset Purchase Program at GBP375 billion.

US weekly jobless claims made another positive surprise this week, coming in at 323,000 versus expectations of 333,000. This ties up with recent data which showed improved Non-Farm Employment Change and Unemployment Rate (7.5 percent).

 Commodities

For the third consecutive week, Gold failed to make a convincing mark above the $1,480-$1,500 area as buyers were unable to demonstrate a show of force. Price edged lower to reach $1,419 before ending the week with a close around $1,448. The $1,400 level would likely be attacked again if buyers will continue to manifest complacency in the coming weeks.

Oil gunned for its third straight bullish weekly close despite a lackluster trading week. Price slid nearly $3 on a volatile Friday, but a $2 upside pop a few hours ahead of Friday’s  closing bell managed to give oil a bullish end for the week. $97 remains the key to further upside.

Currencies

EURUSD’s mid-week upside thrust failed to breach or even touch the coveted 1.3200 mark. This was followed by a two-day 240-pip decline which resulted in the pair’s end-of-week bearish reversal, culminating in a weekly close below 1.3000 for the first time since late April. This was a tremendous upset for bulls as they have been trying to conquer 1.3200 since April. If 1.2950 breaks next week, traders can expect a move toward 1.2700-1.2800 soon.

Like other major pairs, USDJPY made big moves and powered higher late this week thanks to the latest USD strength. After consolidating below 100 since early April, the pair rocketed up and moved closer to 102 before ending the week ultra-bullish at 101.57. It would be interesting to see whether price will ease back to 99-101 in the following weeks.

With USD strength all around, GBPUSD also suffered a humiliating 270-pip decline during the last two trading days of the week, as buyers were unable to capture 1.5600 for the second week. The decline on Friday pierced through an ascending trendline and price looks set to move down toward 1.5200, especially if 1.5300-50 does not hold.

The Week Ahead

Monday jumpstarts the week with the release of Australia’s Home Loans and NAB Business Confidence; China’s Fixed Asset Investment plus Industrial Production; Switzerland and US Retail Sales. Eurogroup meetings are also scheduled.

On Tuesday, there are New Zealand’s Retail Sales; UK RICS House Price Balance; Germany’s Final CPI and ZEW Economic Sentiment; Euro-area Industrial Production; and ECOFIN meetings.

Wednesday starts very early with Australia’s Annual Budget Release and Wage Price Index; Japan’s Tertiary Industry Activity and Consumer Confidence; Germany, Italy, and France Preliminary GDP; UK Unemployment Rate and Claimant Count Change, along with BOE Inflation Report and BOE Chief King’s speech; Euro-area Flash GDP; Canada Manufacturing Sales; US PPI, TIC Long-Term Purchases, Empire State Manufacturing Index, and Industrial Production.

Thursday will be equally active with New Zealand’s Business NZ Manufacturing Index; Japan’s Preliminary GDP; Euro-area CPI and Trade Balance; Canada’s Foreign Securities Purchases; US CPI, Building Permits,  Housing Starts, Philly Fed Manufacturing Index, and Unemployment Claims.

Friday activity is much less with a few key releases scattered throughout the day such as New Zealand’s PPI; Japan’s Core Machinery Orders; Canada’s CPI and Wholesale Sales; and US Preliminary UoM Consumer Sentiment.

ECB Slashes Rates Amid EZ Recession; US Jobs Climb Anew

The European Central Bank headed by Mario Draghi announced on Thursday that based on the recent policy meeting, the governing council reached a consensus to slash the main refinancing rate to a record-low 0.50 percent from 0.75 percent. Without mentioning names, Draghi hinted there was a three-way split within the council between members who wanted a 25 or 50 basis point cut, and those who desire no change. The record-low rate has been decided as the 17-nation Eurozone remains mired in recession.

In the United States, Bureau of Labor Statistics reported another healthy gain in the latest Non-Farm Employment Change data. The data advanced for the third consecutive month, this time with a gain of 165,000. Median forecast was just 146,000. Unemployment rate has eased to 7.5 percent. On the other hand, Chicago Purchasing Managers’ Index slid below the 50-mark for the first time in 6 months, falling to 49.0 which is the lowest reading since September 2009’s 46.1.

Commodities

Gold carried on with its recovery from its two-week tumble, but spent most of the time consolidating before making a minor high on Friday this week. Now, price is just $8 away from full recovery of the April 15 mad slide to the low-$1,300s, and the hesitation to break this area is understandable. A very tough road ahead remains: resistances come in at $1,500, $1,550, and the $1,600-20 area.

Oil fared better than Gold as the former printed its second consecutive bullish weekly close while reaching as high as $96. This comes after oil slid to an $85.91 low three weeks ago. Bulls are in for tougher battles as they still have a lot of wood to chop above $97. Weekly bearish defenses are scattered between $97 and $98.

Currencies

EURUSD succeeded in reaching a new high for the last 8 weeks but the gains were pulverized after the ECB announced its interest rate cut on Thursday. Eventually, the pair closed the week at 1.3110 after sliding to a week’s low of 1.3032. Bulls can still take advantage of momentum if they can conquer 1.3200 before the coming mid-week, ahead of the stubborn 1.3300 level.

After tumbling and a failed attempt to reach 100 during the prior week, USDJPY has regained composure and made a substantial recovery in this weeks’ trading. From 97.00, the pair has advanced to a weekly high of 99.25 before settling below 99.00 at the week’s close. The question now is: will USDJPY bulls be able to conquer 100 this time around?

GBPUSD traded higher in a timid 140-pip weekly range, following the prior week’s impressive 300-pip advance. The 120-pip whipsaw during Friday’s US Jobs data release undeniably messed things up for this pair and other majors, but GBPUSD emerged relatively unscathed. The pair remains on track to climb towards 1.5800 where potential resistances could spoil further gains.

The Week Ahead

On Monday, Japan observes Children’s Day, while the UK observes May Day. Important news releases are Australia ANZ Job Advertisements, Retail Sales; Spain’s Unemployment Change; Italy and Spain Services PMI; UK Halifax HPI; Eurozone Retail Sales; Canada’s Ivey PMI and Building Permits. ECB’s Draghi is set to give a speech this day.

Tuesday starts off early with the quarterly data of New Zealand’s Labor Cost Index; Australia’s Trade Balance and Interest Rate Statement plus Announcement; Switzerland’s SECO Consumer Climate and Foreign Currency Reserves; France Trade Balance and Industrial Production; Germany’s Factory Orders. US Treasury Secretary Lew will give his speech in Cleveland.

Wednesday is off to another early start with New Zealand’s release of RBNZ Financial Stability Report; UK’s BRC Retail Sales Monitor; China’s Trade Balance; Switzerland’s CPI; Germany’s Industrial Production. FOMC Member Stein is slated to give a speech later this day.

Thursday is yet another exciting day as Bank of England announces its Interest Rate along with its Rate Statement and Asset Purchase Facility. Other news for this day include Australia and New Zealand Employment data; China CPI and PPI; ECB Monthly Bulletin; US Unemployment Claims.

Lastly on Friday, Japan publishes the Current Account data, plus other key economic releases include RBA’s Monetary Policy Statement; UK Trade Balance; G7 Meetings; Canada’s Employment data; and speeches from Fed’s Evans and Bernanke.

BOJ Leaves Rates Unchanged, Pursues Monetary Easing

The Bank of Japan has again decided to leave current rates unchanged at 0.10 percent in its latest announcement. BOJ’s chief Kuroda stated that the central bank is implementing monetary easing with the intention of price stability, and not to target foreign exchange. Furthermore, he declared that the BOJ will not halt in buying short-term debt, will continue in buying JGBs in a “balanced way”, and that all Board members agreed that an extension of the current semi-annual review’s forecast period is warranted. BOJ was also of the view that long-term rates could rise when the confidence in financial sustainability wanes.

In other news, US Jobless claims for the prior week surprised the market with a much-better reading than its forecast. According to the Labor Department’s report on Thursday, US jobless weekly claims fell to 339,000, which was lower compared to an expectation of 352,000 and the prior week’s reading of 355,000.

UK’s Office for National Statistics also reported a better-than-expected Preliminary GDP data on Thursday. Gross Domestic Product surprised to the upside with an expansion of 0.3 percent in the first quarter of 2013, avoiding the prospect of a triple-dip recession.

Commodities

After tumbling in the previous two weeks with a total drop of $283, gold made a remarkable recovery this week. Buyers aimed and have achieved to neutralize this week’s slide, closing the week at $1,461 after reaching $1,485 which was just $10 away from the prior week’s top price. In the coming week, buyers must try to overcome the $1,480-$1,500 area.

Compared to gold, Oil did much better in this week’s trading. Oil clinched a smooth climb higher from Wednesday after breaking through the $89.30-50 resistance which held price for nearly two weeks. Oil did so well that it nearly erased all of the losses in the last two weeks. Oil buyers will have to contend next with potential ceiling around $94.70-$95 ahead of higher resistance at $97.70.

Currencies

EURUSD spent most of its 140-pip weekly trading range within the 1.3000s this week. Bulls and bears really fought hard as evident in the quick rejections which occurred in around 1.3090s and 1.2950s. 1.3000 proves to be a very important level and whoever wins in the coming weeks could bring about a potentially lasting move. Beyond 1.2950 and 1.3100, there are 1.2750 and 1.3200 which each side must contend with.

Another week and it was another failure of buyers to clinch the coveted 100 level. The scheduled BOJ Press Conference did not bring anything new to the table. Because of this, Yen bears got disappointed and this helped the pair slide back down to the 98 level. If momentum picks up, the pair could head back to 95 and perhaps even further below.

GBPUSD was very timidly trading during the first three days of this week, but this all changed when the pair blasted higher by nearly 220 pips after the UK GDP data surprised to the upside on Thursday. The better-than-expected data buoyed price until the Friday close, and the pair is on its way to move toward 1.5500-1.5800 in the coming weeks.

The Week Ahead

On Monday, the Asian session will be somewhat quiet as Japanese banks will be closed to observe Showa Day, while Chinese banks will also be closed to observe Labor Day. Later that da y, there are Germany’s Preliminary CPI data, US Personal Spending, US Personal Income and US Core PCE Price Index..

Tuesday is fully-packed as there are New Zealand’s Building Consents and ANZ Business Confidence; Japan’s Household Spending, Manufacturing PMI, Retail Sales, Preliminary Industrial Production, and Unemployment Rate; Australia’s Private Sector Credit; Germany’s Retail Sales, Unemployment Change, and Gfk German Consumer Climate; France’s Consumer Spending; Spain’s Flash GDP; UK’s Net Lending to Individuals; Eurozone CPI Flash Estimate and Unemployment Rate; Canada’s GDP, IPPI, and RMPI.

On Wednesday, China will release its Manufacturing PMI. Other releases include Australia’s HIA New Home Sales; Japan’s Average Cash Earnings; UK’s Nationwide HPI and Manufacturing PMI; US ADP Non-Farm Employment Change, Final and ISM Manufacturing PMI, and US Fed Funds Rate and FOMC Statement.

Thursday, Japan will publish its Monetary Policy Meeting Minutes from BOJ and Monetary Base data. Not long after, there are Australia’s Building Approvals, China’s HSBC Final Manufacturing PMI, Spain’s and Italy’s Manufacturing PMI, UK’s Construction PMI; ECB Rate Announcement and Press Conference; US Unemployment Claims and Trade Balance.

Finally on Friday, there are data releases such as Australia’s PPI, UK Service PMI, EU Economic Forecasts, US Unemployment Rate, US Non-Farm Employment Change, US ISM Non-Manufacturing PMI. Japan will observe Constitution Day on this day.

G-20 Supports Japan’s Policies, while Gold Continues its Massive Fall

Officials of the Group of 20 nations or the G-20, primarily composed of finance ministers and also central bankers, convened on Thursday and Friday to discuss market developments and plot the fiscal path moving forward. Japan’s Finance Minister Taro Aso declared that there was no opposition among G-20 nations concerning Japan’s current policies. IMF chief Lagarde even expressed approval of Japan’s monetary policies. Furthermore, US Treasury Secretary Lew confirmed during his discussion with Finance Minister Aso that the monetary policies implemented by Japan were mainly for domestic fiscal purposes.

In other news, a celebrated marathon held in Boston, Massachusetts turned tragic as an unsuspected improvised blast happened near the finish line last Monday. Three people were killed, along with a few dozens that have been injured – 58 of which reportedly remained in the hospital for treatment. In West, Texas, 14 were killed while around 200 people were injured in an explosion at a fertilizer plant.

Commodities

After an impressive fall of $109 during the prior week, Gold fell a massive $174 this week and gold buyers were only able to recuperate a little over half of the decline at the end of the trading week. Gold is now dangerously close to piercing through the 2011 low at $1,308, and bears are surely salivating ahead of another vicious attack at that level. Bulls, on the other hand, must aim for a move above $1,500 this coming week.

Oil did no better than gold as the former also slipped a little over $5, after declining more than $5 and $4 in the last two weeks. Unlike gold though, oil is now sitting in a potential support around $84-$85 which could slow down the attack of the roaring bears.

Currencies

Hats off to EURUSD buyers who made an early effort this week to bring prices higher from the 1.3000 lows. However, all the early gains were quickly neutralized after the sellers have succeeded in arresting the climb right around the 1.3200 area. This resulted in an equally quick decline in prices back towards the 1.3020s – even creating the weekly low right smack at 1.3000 in the process. In the end, the pair was net sold and closed the week at 1.3050.

USDJPY started off the week with a generous decline from the upper-98s. After touching a 95.78 low, discount buyers entered the scene and took price higher in a relatively smooth fashion. The week culminated in a revisit of last week’s high – reaching as high as 99.67 before easing to close the week at 99.47. Bulls must continue to congregate in order to finally breach the 100 level.

GBPUSD remained weak after attempts at a break of 1.5400 easily fizzled out. Buyers were obviously outnumbered as the pair never got near the coveted level this week. With the weekly close near 1.5200, sellers are closer to pressing price back down to the 1.5000 mark. Potential supports are close by, but price action suggests that bear have a good chance of controlling price next week. A clean break of 1.5200 is the key.

The Week Ahead

Monday is pretty much quiet with only US Existing Home Sales as the key economic release on the plate. FOMC Member Dudley and MC Member Tucker are due to give speeches.

On Tuesday, there are Australia’s CB Leading Index; China’s Trade Balance and HSBC Manufacturing PMI; Germany, France, and Euro-area Flash Manufacturing PMI and Flash Services PMI; Italy’s Retail Sales; UK Public Sector Net Borrowing; Canada’s Retail Sales and speech from BOC’s Carney; and US New Home Sales.

On Wednesday, New Zealand will announce its Official Cash Rate along with the RBNZ Rate Statement.  Other critical releases include Australia’s CPI; Germany’s Ifo Business Climate; UK BBA Mortgage Approvals; US Durable Goods Orders; and speech from BOC Governor Carney.

On Thursday, the key economic releases are Spain’s Unemployment Rate; UK Preliminary GDP; and US Unemployment Claims. New Zealand and Australia will celebrate Anzac Day, while Italy will observe Liberation Day.

Finally on Friday, there are data releases such as New Zealand’s Trade Balance; Japan’s Rate Announcement, Policy Statement, and Press Conference, along with Manufacturing PMI and CPI; speech from SNB Chairman Jordan; and US Advance GDP.

Cyprus Sells Gold to Comply with Bailout, while Gold Price Falls

With its back against the wall, Cyprus announced a plan to sell EUR400 million worth of gold reserves to finance part of its bailout and avoid bankruptcy. This development comes as the Mediterranean island purportedly requires EUR23 billion, as opposed to the initial estimate of just EUR17 billion to finance its needs. The Cypriot government was left on its own to fund the EUR6 billion gap as other Eurozone member-states have declined to provide more assistance than initially offered.

The sales of Cypriot gold reserves would come in addition to the bank levy directed upon depositors with greater than EUR100,000 placed in Cypriot banks. Cyprus emerged as the very first Eurozone member-state to implement capital controls in order to hinder a bank run.

Commodities

Gold sellers celebrated this week as the yellow metal plunged $109 after bears successfully contained moves to break back above the $1,600 level. The drop is very crucial as Gold is now trading its lowest since July 2011. Any nudge lower could trigger further decline to 2011’s lows which is situated just above the $1,300 level. Buyers should take every chance to bring price back above $1,500 from this point on.

Parallel to gold’s drop, oil also slid hard on Friday, hitting a $90.26 low which is not far away from 2013’s low in the lower-$89s. Given the price action in gold, it’s certainly possible for oil to test even lower, perhaps toward the November 2012 low around $84. After that, next target is mid-2012 low in the lower-$77s.

Currencies

EURUSD struggled to break past March highs in the 1.3130s all week. Having said that, price action remains bullish, but an immediate break of the resistance is required to preserve the momentum. Bulls will have to contend with the defense in the 1.3300 next.

This week, USDJPY came as close as 5 pips from hitting the coveted 100 level, yet it surprisingly failed to do so. Stubborn buyers tried all week but they finally yielded on Friday, and this led to giving up 171 pips of gains as price hit 98.08 before the week ended at 98.38. Sellers are now one step closer to filling the gap and testing the 95 level. A horde of eager bulls are expected to show up until price reaches that level.

GBPUSD made modest gains towards the 1.5400 level, but selling pressure just above this level proved unbearable for the late-week buyers. And so, the pair turned back towards the low-1.5300s, trimming the week’s bullish hard work in the process. It’s the bears’ turn to test the defense by the bulls around 1.5300. A break of this level could bring price back in the 1.5000s.

The Week Ahead

On Monday, BOJ chief Kuroda is slated to give a speech in Tokyo. In terms of economic releases, there are Australia’s Home Loans; China’s Retail Sales, Fixed Asset Investment, Industrial Production and GDP; Euro-area Trade Balance; US TIC Long-Term Purchases and Empire State Manufacturing Index.

On Tuesday, the market will witness the release of RBA’s Monetary Policy Meeting Minutes, New Motor Vehicle Sales; Switzerland’s PPI; UK’s CPI, RPI, HPI, and PPI, BOE Inflation Letter; Italy’s Trade Balance; Germany’s ZEW Economic Sentiment; Euro-area CPI and ZEW Economic Sentiment; Canada’s Foreign Securities Purchases and Manufacturing Sales; US CPI, Housing Starts, Capacity Utilization Rate, Industrial Production, and Building Permits. ECB’s Draghi will also give a speech.

On Wednesday, there are reports including New Zealand’s CPI, UK’s Unemployment Rate, Claimant Count Change, and MPC Meeting Minutes; Switzerland’s ZEW Economic Expectations; Canada’s BOC Rate Announcement and Statement, Monetary Policy Report, and Press Conference; US Beige Book.

On Thursday, there are Australia’s NAB Quarterly Business Confidence, Japan’s Trade Balance, UK Retail Sales, US Philly Fed Manufacturing Index and Unemployment Claims. Today is also the first day of the 2-day G-20 meetings.

Finally on Friday, there are news releases such as Euro-area Current Account, Germany’s PPI, Canada’s Wholesale Sales and CPI. Today is also the first day of the 3-day IMF meetings.

BOJ’s Kuroda Delivers; US Jobs Data Doesn’t

Bank of Japan’s new chief Kuroda delivered on the easing plans set by the government headed by PM Shinzo Abe. According to the Monetary Policy Statement, the Policy Board of BOJ agreed to introduce qualitative and quantitative easing and plans to double its holdings of Japanese government bonds and ETFs within two years. Kuroda said the BOJ may act more depending on the future economic developments. Further, he said the 2% inflation target is achievable and there is no concern for any asset bubble. BOJ Overnight Call Rate remained at less than 0.10 percent.

The European Central Bank and Bank of England also kept their respective rates unchanged on Thursday. The rates were held at 0.75 percent and 0.50 percent, respectively. Similarly, the BOE’s Asset Purchase Facility was maintained at GBP375 billion.

On Friday, the US jobs data disappointed the market with a surprisingly weak reading. Non-Farm Employment Change for March came in 88,000, much weaker than the 198,000 median expectations and the prior month’s 268,000. Labor participation rate also plunged to the weakest since 1979 at 63.3 percent. Unemployment rate eased to 7.6 percent.

Commodities

Gold sellers won this week as they were able to pressure price lower after the $1,600 level failed to hold. Price made a quick slide, reaching as low as $1,539 as buyers failed to halt the selling rampage. However, things changed on Friday when a weak US employment data sent Gold soaring back up and interrupted the week’s downmove. Gold closed the week at $1,580 and has a fair chance to reach above the $1,600 next week. The critical question is: how bullish are the buyers at this stage?

Oil reversed all of its previous week’s gains – and then some – this week after the climb above the $97 level proved unsustainable for eager bulls. Price reached toward the resistance area in the upper-$97s and this initiated a price tumble that precipitated all 5 trading days of this week. Oil plunged to $91.91 on Friday before price snapped back up to close the week at $93. Price is likely to enter into consolidation or create a follow-on downmove of buyers won’t step in to bring price back higher from here.

Currencies

EURUSD has finally shown signs of life after it made a significant reversal from the 1.2740s this week. ECB kept rates unchanged on Thursday. The weak US jobs data on Friday helped put more wind in EURUSD’s sail as the pair climbed back above the 1.3000 level. The pair reached a 1.5-week high of 1.3038 before it closed the week at 1.2988. Barring poor momentum and Eurozone developments, the pair is on track to move higher and back to the 1.3500s.

USDJPY had a spectacular week as the BOJ and its new chief Kuroda delivered well in his first-ever press conference. The pair rocketed 500-pips higher in just two days and it seems it could continue on for some time. Buyers should now guard the 95-96 area to maintain the current momentum.

GBPUSD, like EURUSD, was sent higher on Thursday and Friday after the week’s developments. The Bank of England also kept the rates and its Asset Purchase Facility unchanged and the pair sprung higher by 320 pips. The climb easily pierced through the key resistance at 1.5300 level and this give buyers a better chance at higher prices. 1.500 stands in the way ahead of 1.57-1.58.

The Week Ahead

On Monday, the market will witness the release of economic data such as Japan’s Economy Watchers Sentiment and Current Account, Australia’s ANZ Job Advertisements, Euro-area Sentix Investor Confidence, Germany’s Industrial Production, and Bank of Canada Business Outlook Survey.

On Tuesday, there are reports including NZIER Business Confidence, UK’s BRC Retail Sales Monitor and RICS House Price Balance, Japan’s Monetary Policy Meeting Minutes, China’s PPI and CPI, Germany’s Trade Balance, Switzerland’s Retail Sales, UK’s Trade Balance and Manufacturing Production, and Canada’s Housing Starts and Building Permits.

Wednesday will be slightly quieter this week with only a few key releases such as Australia’s Westpac Consumer Sentiment, China’s Trade Balance, Italy and Eurozone Industrial Production, and FOMC Meeting Minutes.

On Thursday, there are New Zealand’s Business NZ Manufacturing Index, Japan’s Core Machinery Orders, Australia’s Employment data, ECB Monthly Bulletin, and US Unemployment Claims. FOMC’s Bullard and UK MPC’s Tucker will also be expected to give speeches.

Finally on Friday, there news releases such as Japan’s Tertiary Industry Activity, Germany’s WPI, Euro-area Industrial Production, and US PPI, Retail Sales, and preliminary University of Michigan Consumer Sentiment. Eurogroup meetings and ECOFIN meetings will also take place. Moreover, speeches may be delivered by US Federal Reserve’s Rosengren and Bernanke.

Cyprus Developments Under Way While Euro Struggles On

Macro Economic/Political Events

Developments in Cyprus are underway as officials continue their discussions to bailout the ailing island nation. Among the key developments is the institution of capital controls which includes enforcing no cap on the amount that debit and credit cardholders can spend within the country; withdrawal limit of EUR300 daily; overseas purchase limit of EUR 5,000 monthly; encashing of checks are banned, among others. These controls are said to be subject for review on a daily basis and are expected to last for a month or so.

Banks in Cyprus have reopened while the stock exchange remained close. According to the stock exchange’s Chief Executive Officer Nondas Metaxas, the stock exchange may open for limited trading on Tuesday (April 2) after being closed for about two weeks since Cyprus faced the financial crisis.

In other news, New Zealand surprised the market with a much better than expected February Trade Balance data on Tuesday. Statistics New Zealand reported a whopping NZD414 million surplus compared to an expectation of just NZD2 million. January’s reading was also revised higher to minus NZD287 million from minus NZD305 million. Consumption goods in the form of sheep meat and milk powder contributed the most in the rise of exports to China.

Meanwhile, US Revised University of Michigan Consumer Sentiment, US S&P/CS Composite-20 HPI, and US Durable Goods Orders all advanced. In Japan, Retail Sales and Household Spending came in better than expected while deflation remains, as shown by the CPI data.

Commodities

The Gold move above $1,600 seemed short-lived as price took back most of the gains from last week, even moving back to last week’s closing area and moving slightly below its low before ending the week at $1,596. Monday’s $24 drop was too much for the bulls and price merely traded within this range, mostly trading in the lower half portion of this range. This is a minor setback for bulls; they still need to bring price higher and above the $1,620 resistance.

Oil enjoyed another bullish week as it set its 4th weekly bullish close, closing above $97 this time. Bulls drove price higher by nearly $4 as they aim for a break of $98.22 ahead of $100. Given the current price action, it won’t be surprising to see a pullback ahead of the near-term resistance before any eventual upmove.

Currencies

EURUSD saw another week with a gap down and a weaker close. The pair gapped down slightly on Monday which set the pace for the entire week. More sellers joined the fray when price made a temporarily climb above 1.3000, and this created a 218-pip move on the first day of the week. Price traded lower from then on until reaching a 1.2750 low before a meaningful bounce. Sellers could still be aiming for the 1.2600s before we could see another visit above the 1.3000s. Traders ought to watch the developments in Cyprus.

USDJPY wandered around aimlessly in a 140-pip range this week since price broke down the key 95 level in the prior week. Buyers attempted to breach the 95 level twice this week but they easily failed. This pair should see more action next week with the BOJ rate announcement.

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

Daylight Saving Time shift will happen in Switzerland, the UK, and several Eurozone countries. Meanwhile, New Zealand and Australia will exit DST on April 6 (Saturday) and April 7 (Sunday), respectively.

On Monday, New Zealand, Australia, France, Switzerland, Germany, Italy, and the UK will observe Easter Monday. On Thursday and Friday, China will observe Tomb Sweeping Day.

News-wise, Monday will see the release of Japan’s Tankan Manufacturing and Non-Manufacturing Index, China HSBC Final Manufacturing PMI, US Final Manufacturing PMI, US Construction Spending, and US ISM Manufacturing PMI.

On Tuesday, there are Japan’s Monetary Base, Average Cash Earnings; Australia’s Cash Rate and RBA Rate Statement; Spain Unemployment Change, Germany’s Preliminary CPI, Italy and Spain Manufacturing PMI, Italy Monthly Unemployment Rate, and Euro-area Final Manufacturing PMI; UK Halifax HPI, Net Lending to Individuals, M4 Money Supply, and Manufacturing PMI; US IBD/TIPP Economic Optimism, Factory Orders, and Total Vehicle Sales. FOMC Member Evans will also give a speech.

Wednesday will start off with Australia’s HIA New Home Sales and trade balance, China’s Non-Manufacturing PMI, UK BOE Credit Conditions Survey, UK Construction PMI, Eurozone CPI Flash Estimate, US ADP Non-Farm Employment Change, Crude Oil Inventories, and ISM Non-Manufacturing PMI.

Thursday will get much busier with Australia’s Retail Sales and Building Approvals; Japan’s Overnight Call Rate, BOJ Press Conference, and Monetary Policy Statement; Italy, Spain, and UK Services PMI; Eurozone Final Services PMI and PPI; ECB Rate Announcement and Press Conference; UK Asset Purchase Facility, Bank Rate, and MPC Rate Statement; US Unemployment Claims, and speeches from Fed Chairman Bernanke, and FOMC Member George, Evans, and Yellen.

Finally on Friday, there are economic releases such as BOJ Monthly Report, Switzerland Foreign Currency Reserves, Euro-area Retail Sales, Germany Factory Orders; Canada and US Employment data and Trade Balance, Canada Ivey PMI, and US Average Hourly Earnings.

Markets Await Resolution in Cyprus Financial Crisis

Macro-Economic Events

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.

Commodities

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.

Currencies

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.

Exceptional Australia Employment Data Lifts Aussie Dollar

Australian Bureau of Statistics reported on Thursday a surprisingly strong Employment Change number, rising 71,500 versus 9,500 median expectations. Unemployment rate declined to 5.4 percent as full-time and part-time employment gained.

After the ECB, BOE, BOJ, BOC, and RBA all made their respective interest rate announcements last week, it was RBNZ’s turn this week. Reserve Bank of New Zealand has maintained its Official Cash Rate (OCR) at 2.50 percent. According to the Monetary Policy Statement from RBNZ, the global market sentiment has somehow improved as worldwide growth risks recede. On the domestic front, policymakers saw an uneven economic recovery as labor market remains relatively weak. The next release is expected on April 24.

In other news, US Retail Sales rose 1.1 percent in February, the best reading in the last five months, on the back of improving labor market conditions and household finances. Meanwhile, the March preliminary reading for University of Michigan Consumer Sentiment weakened to its lowest since late 2011 as consumers expressed dismay over the government’s fiscal policy decisions. The sentiment index fell to 71.8 compared to median expectation of 78.2.

Commodities

Gold has traded a mere $25 range in the March 10 week and was unable to breach–and even touch–$1,560. This led to a rebound in price this week where bulls were also unable to touch the $1,600 level. Keen buyers still need to face the topside resistance at $1,620 and $1,650 before they can even relax a bit.

Oil also rebounded this week after touching a $89.33 low in the prior week. From $90.88, oil rose to $93.81 and looks ready to take on a move towards $98.22, the 2012 high set on January 27. The journey would not be smooth as bulls have to contend with potential sellers around the $95 area.

Currencies

EURUSD has pretty much consolidated this week but this changed as the weekend neared, as price made range downside and topside breaches on Thursday and Friday, respectively, reaching as low as 1.2910 and as high as 1.3106. Having said that, the pair remains in consolidation and buyers must attempt a break of 1.3150 ahead of key resistance at the 1.3300 level.

USDJPY bulls have attempted to make another milestone by reaching the 97.00 level but they failed all five days of this week. Because of this, sellers stepped in to drive price lower on Friday, nearly touching the 95 level and closing the week just about 30 pips higher than this important level. It would be interesting to see if sellers would continue their campaign next week.

GBPUSD made an impressive recovery this week, rising 345 pips from 1.4830 lows to Friday’s 1.5175 weekly high to end the week just above 1.5100. In so doing, bulls have now increased their chance to revisit and break the infamous 1.5300 level. If they will make good of this golden opportunity, they would be able to unlock a potential trip to 1.5700 ahead of the 16-month high at 1.6338.

The Week Ahead

Mid-week will be evenly busy, while Monday and Friday will be moderate as they typically are.

Monday will start off with New Zealand’s Westpac Consumer Sentiment, followed by Australia’s New Motor Vehicle Sales, Switzerland’s SECO Economic Forecasts, Italy’s Trade Balance, Euro-area Trade Balance, Canada’s Foreign Securities Purchases, and finally US NAHB Housing Market index.

On Tuesday, Australia’s central bank will release its Policy Meeting Minutes coupled with speeches from RBA Assistant Governor Debelle and RBA Deputy Governor Lowe. China will be out with its Foreign Direct Investment report; followed by Italy’s Industrial Production; UK CPI, RPI, HPI, and PPI, as well as BOE Inflation Letter; Euro-area and Germany’s ZE Economic Sentiment; Canada’s Wholesale and Manufacturing Sales; and US Building Permits.

Wednesday sees the release of New Zealand Current Account, Euro-area Current Account, Germany’s PPI, UK MPC Meeting Minutes, UK Annual Budget Release, UK Unemployment Rate, UK Claimant Count Change, Euro-area Consumer Confidence, Germany’s 10-year Bond Auction, Switzerland ZEW Economic Expectations, US FOMC Statement and Rate Announcement and Press Conference.

For Thursday, there are New Zealand’s Gross Domestic Product report; Australia’s RBA Bulletin; Japan and Switzerland Trade Balance; China, Germany, US, and France Flash Manufacturing PMI; UK Retail Sales; Canada Retail Sales; US Philadelphia fed Manufacturing Index and Existing Home Sales.

On Friday, economic news release activity tapers off with only a few releases on tap such as Australia’s CB Leading Index and speech from RBA Assistant Governor Edey, and Business Climate reports from Belgium and Germany.

The Dollar Rises as US Payroll Data Exceeds Forecast

US employers ramped up their payrolls and employment climbed 236,000 in February, a report from the US Department of Labor’s Bureau of Labor Statistics showed on Friday. This came as a surprise as median forecast by analysts and economists were for a 162,000 advance. Unemployment rate has slid to 7.7 percent from January’s 7.9 percent reading. The US unemployment rate has stayed in the 7 percent mark for 6 consecutive months now.

In other news, Statistics Canada reported that employers has gone back to adding jobs in February, with employment rising 50,700 after it declined 21,900 in January. This rebound in jobs growth is the third highest figure in the last 10 months. Unemployment rate has steadied at 7 percent.

The European Central Bank, Bank of England, and Bank of Japan made their interest rate decisions this week. All three central banks maintained their rates, at 0.75 percent, 0.50 percent, and less than 0.10 percent, respectively. Next announcement for all three central banks would come in April 4. Meanwhile, Reserve Bank of Australia and Bank of Canada also retained the rates, at 3 percent and 1 percent respectively, and would have their next decisions announced on April 2 and April 17.

Commodities

Gold has gone very quiet this week as trading became confined mostly between $1,560 and $1,585 – a mere $25 range for the most part. It would be quite interesting to see which side comes away victorious in the coming few weeks. $1,550 is the key area on the downside, while bulls would have to face $1,620 and $1,650 before other resistances on the topside.

Unlike Gold, Oil has fared a little better this week as it managed to climb towards $92 after being confined in a range battle around the $90s in the first half of the week. The lower-$89s has been well-supported by buyers and this gave them the base for a move higher. $92 has been hit in transit but price ended the week slightly lower at $91.84. $93 and $94.50 are the next targets higher as long as the $89-$90 area holds.

Currencies

EURUSD had an uninspiring week as bulls failed to cement the move higher to the 1.3100s during Thursday and Friday. The pair spent most of its time in the 1.3000s and in fact the week closed at 1.3003, about 8 pips lower than its open. Buyers need to act decisively this coming week, otherwise the chances of 1.3000 breaking convincingly grows further.

After trading to the downside last week, the rollercoaster ride has come full circle as USDJPY made another milestone this week. The pair has zoomed 360 pips higher, broke the key 95 level, and reached as high as 96.54 before settling back to the 95s and closing the week at 95.97. USDJPY is not set to create a fresh 41-month high if buyers can reach 98.

GBPUSD has created four lower weekly highs and four bearish weekly closes, and yet bears seem eager for more destruction. This week, sellers pressed lower and reached 1.4883, just a few pips shy of July 2010’s 1.4872 low. Bulls now need to make drastic steps to prevent further price declines, but so far there is not much holding bears back from reaching 1.4200 to 1.4600.

The Week Ahead

Starting March 10, Canada and the United States will implement the Daylight Savings time shift and clocks will move ahead by 1 hour.

This time around, Monday will have a sparse amount of critical news releases, such as Japan’s Core machinery Orders, China’s New Loans, Germany’s Trade balance, France’s Industrial Production, and Switzerland’s Retail Sales.

On Tuesday, there will be Japan’s BSI Manufacturing Index, Consumer Confidence, and BOJ Policy Meeting Minutes; UK’s RICS House Price Balance, Trade Balance, and Manufacturing Production; Australia’s NAB Business Confidence; and US Federal Budget Balance.

Wednesday is also concise this week with Australia’s Westpac Consumer Sentiment, Euro-area’s Industrial Production, and US Retail Sales, Business Inventories, and Import Prices.

On the other hand, Thursday and Friday will be much busier. For Thursday, there are New Zealand’s Interest Rate Announcement,, Statement, and Press Conference; Australia’s Employment data; Switzerland’s Libor Rate and SNB Monetary Policy Assessment; ECB Monthly Bulletin; EU Economic Summit; Canada’s NHPI; US PPI, Unemployment Claims, and Current Account.

On Friday, there are New Zealand’s Business NZ Manufacturing Index; Switzerland’s PPI; Euro-area and US CPI; US Capacity Utilization Rate, TIC Long-term Purchases, Empire State Manufacturing Index, and Preliminary University of Michigan Consumer Sentiment.