USD/JPY Daily Commentary for 3.5.09

The USD/JPY continues its awesome run after Japan announced Capital Spending declined by more than expected.  The Japanese economy is deteriorating at a rapid state, and faster than analysts anticipated.  Therefore, the Yen continues to lose its luster as a safe haven currency with the Japanese economy faring the worst amidst the global economic crisis.  Meanwhile, the USD/JPY is edging ever so closely to the highly anticipated 100 mark.  While USD/JPY exudes incredible strength, we expect a struggle at 100 due the psychological value of the level.  Furthermore, our 3rd tier downtrend line is approaching, bearing down on the currency pair.  Thus, while we may see some more near-term gains, we expect some profit taking and retraction soon.  Fundamentally, we maintain our resistances of 99.64, 100.30, 100.80 and 101.58.  To the downside, we hold our supports of 99.05, 98.25, 97.66, and 97.22.  The USD/JPY is currently exchanging at 99.27.

GBP/USD Daily Commentary for 3.5.09

The Cable continued its rise yesterday, testing our 2nd tier downtrend line with little success, and is selling off Thursday after the BOE lowered interest rates by 50 basis points.  The monetary shock was in line with analyst expectations.  Even though the rate cut has been priced into the GBP/USD, investors are more focused on the BOE’s planned use of quantitative easing, or printing money to buy government bonds.  Quantitative easing has shown little success in the past, turning Japan into a so-called ‘zombie economy’ for nearly a decade.  Quantitative easing could result in a deflationary cycle, hammering the GBP/USD.  However, in the big picture, the U.S. could implement quantitative easing itself, offsetting the move by the BOE.  Regardless, the GBP/USD remains in a clear downtrend with little sign of a substantial turnaround.  With U.S. equities in a free-fall, and positive correlation between the Cable and equities isn’t encouraging.  On the positive side, the GBP/USD still has the 3/2-3/4 trading base to rely upon as support in the near-term.  If things get worse, then the Cable will still need to retest 2009 lows, and that’s quite a process.  Fundamentally, we maintain our resistances of 1.4119, 1.4173, and 1.4219 with fresh top-end resistance of 1.4292.  To the downside, we hold our supports of 1.4078, 1.4023, 1.3964, and 1.3905.  The 1.45 level still serves as a psychological barrier to the upside with 1.40 serving as a cushion to the downside.  The GBP/USD is currently exchanging at 1.4102.

EUR/USD Daily Commentary for 3.5.09

The Euro appreciated against the Dollar yesterday as the EUR/USD flexed its positive correlation with U.S. equities.  However, the EUR/USD couldn’t keep its head above our uptrend line, and is dropping Thursday with investors highly anticipating the upcoming rate decision from the ECB.  The ECB is expected to lower its benchmark by 50 basis points to 1.50%.  Though the monetary shock is likely to come in line with analyst expectations, investors will be paying closer attention to the tone coming from ECB President Trichet.  If Trichet leaves the door open to more rate cuts in the near future due to a weakening EU economy, then we could see a selloff in the EUR/USD.  On the other hand, if the rate cut comes in line and Trichet provides a neutral stance, we could see a rally on the news in the EUR/USD.  Meanwhile, the EUR/USD is trying to hang in the 2/27-3/3 trading range.  If the EUR/USD can continue to stabilize, then we can see a retest of our uptrend line and possibly our 1st tier downtrend line.  Despite the recent stability in the major currency pair, the medium-term downtrend still holds precedence.  Therefore, there is little reason to expect a huge surge to the upside for the time being.  Fundamentally, we find support of 1.2555 with 2nd tier and bottom end resting at 1.2514 and 1.2458, respectively.  To the topside, we find resistance of 1.2634 with 2nd tier and top-end hanging at 1.2677 and 1.2725, respectively.  The EUR/USD is currently exchanging at 1.2560.