As market worries calm attention, shifts back to incoming data

The USD remained relatively stable against its counterparts yesterday, as the market worries about a possible contagion of the crisis in the US banking sector continued to ease preventing the greenback from any substantial gains. Traders are expected to turn their attention towards the release of the final GDP rate for Q4 last year and a possible acceleration of the rate could provide some support for the greenback. On the other hand though an extended positive market sentiment may lead to safe haven outflows for the greenback on a fundamental level. The main release of the day though is expected to be Germany’s preliminary HICP rate for March and a possible slowdown of the rate could weaken the common currency as it may foreshadow a wider slowdown of inflationary pressures in the Eurozone thus allowing the ECB to ease its hawkish approach. It’s characteristic that one of the main drivers behind ECB’s hawkish approach in the past was Germany’s Bundes Bank and a slowdown of Germany’s HICP rate may soften their approach as pressure is reduced. Overall, we note that there was an improved market sentiment in the market that allowed US stock markets to be on the rise as all three major indexes, the Dow Jones, S&P 500 and Nasdaq ended their day in the greens, maybe with the tech sector leading the way. It’s characteristic that there seems to be an overspill of yesterday’s positive market sentiment also in Europe’s stock markets with Frankfurt’s DAX and Paris’ CAC opening with positive gaps in today’s European sessions, sending an optimistic signal. We should note though that gold’s price edged lower yet the overall picture remains of a sideways movement, partially also due to the fact that US yields remained relatively unchanged, a possible drop of US yields may polish the shiny metal. We intend to keep under close watch the movement of the 2-year and 10-year yields of US Bonds today, while the negative correlation of the USD and gold’s price may also play a key role for gold’s price today. WTI prices edged lower yesterday despite the EIA crude oil inventories figure showing a surprise drawdown as a Russian supply cut was lower than expected, while the worries for supplies from Iraq’s Kurdish territory remain present and should the expectations for a tighter supply intensify we may see oil’s prices gaining some ground.  

USD/JPY continued to edge higher yesterday, yet hit a ceiling at the 132.85 (R1) resistance line. Given the inability of the pair to break the prementioned resistance line and the fact that the RSI indicator has started to lower towards the reading of 50 we maintain our bias for the sideways motion to continue. For a bullish outlook though we would require a clear break of the 132.85 (R1) line which please note that has held its ground against upward pressure of the pair’s price action twice in the past ten days namely the 22^nd of March and yesterday the 29^th, proving its worth as a resistance level. Should the R1 be broken we note the 135.15 (R2) as the next possible target for the bulls. Should the bears take over we may see USD/JPY reversing course and aim if not breach the  129.75 (S1) support line.

EUR/USD seems to be finding resistance at the 1.0855 (R1) line, thus maintaining a tight rangebound motion just below it. We tend to maintain our bias for the sideways motion to continue for now yet the release of Germany’s inflation data and the US final GDP rate for Q4 may alter the pair’s direction. Please note that the RSI indicator is still above the reading of 50 which tends to imply that there is still a residue of bullish sentiment left in the market. Should the bulls take over we may see the pair breaking the R1 clearly and take aim of the 1.1000 (R2) level. Should the bears be in charge we may see EUR/USD aiming if not breaching the 1.0695 (S1) support line.     

Other highlights for the day:

During today’s early European session, we note the release of Switzerland’s KOF indicator, Eurozone’s Economic Sentiment and final Consumer Confidence all being for the month of March. During the American session, we highlight the release of the US’s final GDP rate for Q4 and note the release of the weekly Initial Jobless Claims figure. During tomorrow’s Asian session, we note from Japan the release of Tokyo’s CPI rates for March, the unemployment rate for February and the preliminary industrial output growth rate for the same month, while we highlight the release of China’s NBS manufacturing PMI figure for March.

EUR/USD H4 Chart

Support: 1.0695 (S1), 1.0530 (S2), 1.0430 (S3)

Resistance: 1.0855 (R1), 1.1000 (R2), 1.1140 (R3)

USD/JPY H4 Chart

Support: 129.75 (S1), 127.55 (S2), 125.05 (S3)

Resistance: 132.85 (R1), 135.15 (R2), 137.90 (R3)

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