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US data came in our way better than expectations, as we say the manufacturing sector has improved in March on the back of export orders, though still contracting, yet hope was seen as abroad demand supports the sector from deepening the fall, while prices paid inclined reflecting the heated pressure of incoming prices as the dollar depreciates, while the most intriguing was the pick up slightly in the employment sub-index yet still below the marginal 50 level. In another report construction spending fell much less than median estimates and the previous fall was also upwardly revised, and we know how sensitive markets are to any data correlated to the worn out housing sector.

Markets reaction was seen of US equities as they extended the rally and treasuries fell, as for the dollar is spread its wings wider as it’s gaining against majors. The euro deepened the losses to set a fresh intraday low at 1.5563 and still faced by good support at 1.5550s as we said earlier which resides at the 23.6% Fibonacci Retracement which as well offers good demand on the pair, yet if breach will extend the ongoing correction till the upcoming levels till 38.2 percent.

The pound meanwhile after regaining some strength and touching the high for the day at 1.9873 then the dollar strength took the pair back to early lows to dip below the 1.9750s reaching 1.9729.

As for the yen the USDJPY upside rally has extended to set a fresh high approaching the strong resistance level at 102.0s which needs strong momentum to be breached, the high was set at 101.91 as now the pair is still trading at its highs near 101.80s to reattempt the mentioned resistance once more. While now if the pair manages to consolidate above 100.50s the upside wave will extend for the 50% Fibonacci Retracement as we said at 102.0s.

Crown Forex

disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.

European Mid Morning Update

Releases from Europe:

Recent comments made here concerning the fact that consumers may well be the deciding factor in any negative outcome in Europe were given some early credence from Germany’s February retail sales which declined by -1.6% versus forecasts of a +0.5% rise. However, the annual was announced in line with forecasts at -0.3%.

Overall it tends to confirm what the retail PMI has told us but we have to remember that the retail PMI numbers were measured from March’s performance and this tends to suggest that the negative numbers should be repeated again next month.

Elsewhere the World Bank has revised growth forecasts for Asia lower reflecting that not even developing nations are going to beat the current global crisis. With credit hungry consumers in major industrialized nations suddenly taking more cautious stance to their own finances as they react to higher oil and food prices Asia could stand to take a harder hit than previously expected.

The following economic releases are due today:

February

Euro-zone Unemployment Rate 7.1%
U.S. Construction Spending (MoM) - 1.0%

March

Swiss SVME PMI 60.0
Italian Manufacturing PMI (F) 50.2
French Manufacturing PMI (F) 52.0
German Manufacturing PMI (F) 54.9
French Manufacturing PMI (F) 52.0
German Unemployment Rate 7.9%
German Unemployment Change - 45K
U.K. Manufacturing PMI 51.0
U.S. ISM Manufacturing 47.5

For the rest of the day we have the European manufacturing PMI data which is forecast to remain just about unchanged but the risk is probably more to the downside following the rather dismal retail PMI numbers.

The U.S. ISM is expected to have declined also.

All in all there is very little to get optimistic about and this has caused the Dollar to drive higher as short positions are squared following yesterday’s failure to push the Euro above the 1.5901 high.

Watch support in the Euro at 1.5618 and 1.5655-65 while the Swissie finds a barrier at 1.0050-60 and above that at 1.0104. The Pound should find support around 1.9709-33.

Note important support and resistance areas:

Ian Copsey
Global Forex Trading
http://www.gftforex.com

DISCLAIMER: This forum and the information provided here should not be relied on as a substitute for extensive independent research before making your investment decisions. Global Forex Trading is merely providing this column for your general information. The views of the author are not necessarily those of Global Forex Trading, its owners, officers, agents or employees. In addition, any projections or views of the market provided by the author may not prove to be accurate. Global Forex Trading and Cornelius Luca will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained in this column. Global Forex Trading and Cornelius Luca do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.

Noting the recent slump in consumer and business sentiment as signs the economy is cooling, the RBA felt comfortable leaving the cash rate at 7.25% as expected. Changes to monetary policy typically take several months to be left in the broad economy. The most recent rate raise was announced on March 4th, so we are likely to see continued slowdown in Australian economic metrics as borrowing costs filter through. Governor Glenn Stevens also made note of the "quite fragile" state of global financial markets as further reason to remain on the sidelines. The result was widely expected after Stevens characterized the previous rate hike as "substantial" and failed to yield any significant volatility in AUDUSD or related pairs.

DailyFX

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Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

For the uptrend to be violated, EURUSD would need to close below 1.5730. As that has not been the case, we see current price action as consolidation rather than a trend change. The current lull looks to owe itself to looming event risk, with ISM Manufacturing data due tomorrow and Nonfarm Payrolls on Friday. As the docket clears, we see a return to upside momentum eyeing a test of the psychologically significant 1.6000.

EUR/USD

Strategy: Bullish at 1.5730, Targeting 1.6000

Last week, EURUSD rose from support near 1.5340, a level where an upward-sloping trend line and the 61.8% Fibonacci retracement of 1.4439 –1.5900 rally intersect. The ascent was once again capped at 1.5900, last week’s target level. The pair now finds itself range-bound between the highest close of the previous bullish run near 1.5730 and the 1.5900 double top. For the uptrend to be violated, EURUSD would need to close below 1.5730. As that has not been the case, we see current price action as consolidation rather than a trend change. The current lull looks to owe itself to looming event risk, with ISM Manufacturing data due tomorrow and Nonfarm Payrolls on Friday. As the docket clears, we see a return to upside momentum eyeing a test of the psychologically significant 1.6000. 

GBP/USD

Strategy: Flat at 1.9800, waiting for confirmation

Last week, we saw sterling resume the bullish run, rallying from trend line support to reach our target of 2.000. Liming our upside here proved wise - GBPUSD put in a top closely nearby at 2.0090, the 61.8% Fib of the 12/12/07 – 01/22 decline. The pair has since declined all the way back down to close below trend line support. The last remaining hurdle remains at the 38.2% Fibonacci retracement level found near 1.9800. Should GBPUSD close below that, the path is clear for downside as low as 1.9330. We will opt to stay on the sidelines for the moment, waiting to see how price action reacts at Fib support. 

USD/JPY

Strategy: Flat at 100.00, waiting for confirmation

USDJPY has done little since putting in a bottom at the 161.8% Fibonacci extension of the 117.90 – 104.84 down move. Last week’s price action was marked by a tight range between 100.70 and 98.50. With most recent US data shifting from “bad” to “mixed”, the current lull makes sense with traders holding out for ISM and NFP this week before committing to any directional moves. That said, the USDJPY has seen close correlation to stock indices and overall risk sentiment in recent months. The latest monetary easing by the Fed has been seen as accommodative, suggesting the pair has scope to move up higher as jittery markets calm their nerves. Though we remain on the sidelines at the moment, our bias leans bullish. We will look for a close above 100.70 to go long, targeting a return to 105. 

USD/CHF

Strategy: Bearish below 0.9840, Targeting 0.9640

Having concluded a bout of greenback strength, the USDCHF paused at the 61.8% Fibonacci retracement of the 1.1108 – 0.9647 decline near 1.02. Our bearish bias has been validated, though the pair failed to revert all the way the wick low at 0.9640. Presently, the pair has found support just above 0.9840, a level corresponding with the 3/17 close, a record lowest. Our bias remains bearish in the near term. As with the EURUSD, the threat of major US data presents an event risk that should USD bears from picking up significant traction. Once the docket clears, we expect the down trend to resume. 

USD/CAD

Strategy: Bearish against 1.0250, Targeting 0.9860

The loonie has perpetually ignored the other majors, remaining range-bound while the others swung fantastically to record levels. Though it briefly peaked above the range top at 1.0249 in January, the move turned out to be a head-fake: USDCAD promptly fell back into familiar territory, bracketed on the bottom by the 38.2% Fibonacci retracement of the 0.9055 – 1.0249 rally. Last week, the pair began a decline from the same, familiar resistance but was stopped short. A second Fibonacci retracement drawn from the 01/22 false break top along the decline to the range bottom places a 61.8% retracement level at 1.0121. USDCAD spent last week bound to this smaller sub-range and now finds itself at the top yet again. With no significant evidence to contend a change in the range bound dynamic, our strategy remains to short the pair back down to established support level. 

AUD/USD

Strategy: Bullish against 0.9119, Targeting 0.9500

As we suggested last week, the AUDUSD bounced from support at the long-term trend line established on 08/17/07 to take out the 61.8% Fib of the 01/22-02/28 rally at 0.9119. The pair stalled after testing the 0.9200 level, following the other majors in a mild easing of dollar weakness. Currently resting above 0.9119, AUDUSD looks poised to resume upside momentum as the calendar moves past ISM and NFP event risk. We remain bullish, eyeing a re-test of the double top at 0.9500. 

NZD/USD

Strategy: Bearish against 0.7900, Target TBD

The Kiwi dollar’s decline has penetrated the 38.2% retracement of the 0.7380 – 0.7897 rally, accelerating downward. Looking ahead, significant support levels remain at 0.7799 and 0.7702, the 50% and 61.8% Fibonacci retracements of the same rally. Our bias has shifted to from neutral to bearish below 0.7900, though we will hold off on locking in a target as we monitor future price action at the aforementioned Fib support levels. 

To reach Ilya with comments regarding this or other articles he has authored, please email him at ispivak@dailyfx.com.

The Euro has risen to a fresh all time high at 1.5894 so far, the intraday bias, according to the ActionForex Technical team, is on the upside: “Intraday bias remain on the upside as long as 1.5721 minor support holds. As discussed before, firm break of 1.5902 high and 1.5915 fibo resistance will confirm that whole rally from 1.4365 has resumed.”

On the downside, the ActionForex technical Team affirms: “On the downside, though, below 1.5721 will indicate firstly that an intraday top is in place. Secondly, it will argue that consolidation from 1.5902 is still in progress and another fall could be see to retest 1.5342 before resuming recent up trend.”
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1-Apr

US ISM Manufacturing (MAR) (14:00 GMT; 10:00 EST)
Expected: 47.5
Previous: 48.3

What Are The Markets Facing?

The Institute for Supply Management is expected to report that their survey of conditions in the manufacturing sector fell to a nearly five-year low of 47.5 in March from 48.3. However, data from the Philadelphia, Richmond, and Chicago Federal Reserve regions all showed a mild improvement during the month. Looking a bit closer at the reports, the Philly and Chicago Fed indexes remained very much in contractionary territory, while the Richmond Fed index edged up to a six-month high. That said, these are all very volatile reports, but given broadly weak domestic demand in the US, the risks are tilted to the downside for the ISM manufacturing release. Meanwhile, the employment component will also be watched carefully as a gauge for Friday’s Non-farm Payroll report. NFPs are expected to fall negative for the third consecutive month, which would significantly raise expectations for another sharp rate cut by the Federal Reserve at the end of April. Currently, futures are fully pricing in a 25bp cut to 2.00 percent at the end of April, while increasingly leaning towards a 50bp cut. If we see that the manufacturing sector report on Tuesday and other data, including NFPs, add to the pile of evidence pointing toward a US recession, futures markets may shift quickly to fully price in a 50bp cut to the fed funds rates on April 30.

Bonds - 10-Year Treasury Note Futures

Treasuries broke higher from a very short-term range on Monday, but have run into resistance at the 119-12 level. Nevertheless, the contract continues to look bullish and may target 119-24 next. Upcoming economic data may support the case for additional Treasury gains as ISM Manufacturing is expected to remain below the 50 boom/bust level for the second consecutive month. On the other hand, if the manufacturing sector report proves to be optimistic or if the equity markets see strong gains - indicating that traders are feeling a bit more risk-seeking - Treasuries could ease back toward support at 117-25.

FX - EUR/USD

The EUR/USD pair has been quick to return to trading near record highs, though the 1.5850/1.5900 level has provided formidable resistance. According to COT positioning, the euro may be forming a near-term top given the spike in the 13 week index from 33 to overbought levels near 80. However, the 52 week index remains low at 24, suggesting that the larger bullish trend could continue. As a result, it appears that we may see a consolidation over the next few weeks, similar to what we saw between November 2007 and January 2008.

This week is filled with event risk for the EUR/USD pair - due primarily to US releases - and ISM Manufacturing will get the ball rolling. The index is anticipated to fall lower, indicating contractionary conditions in the manufacturing sector for the second consecutive month. If the reading is in line with expectations, the news could weigh on the US dollar in the short-term, but the price action may not continue through during the rest of the day. On the other hand, a surprisingly strong ISM report - particularly above the 50 boom/bust level - could send the EUR/USD tumbling towards support at 1.5686.

Equities - Dow Jones Industrial Average

The decline in the Dow Jones Industrial Average has run into support at the 50% fib of the rally from 11,731 - 12,622 at 12,177. However, the 50 SMA at 12,306 has provided near-term resistance and has prevented any solid comeback for the index. Looking ahead, we could continue to see some stabilization near these levels, though the overall trend and bias for the DJIA remains very much to the downside. If Tuesday’s ISM Manufacturing data proves to be disappointing, this could weigh on US equities as the news would only add to evidence pointing toward a US recession.

DailyFX

Disclaimer

Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.