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YouTradeFX Daily Market Analysis : 04/03/2013
China may hold off tightening monetary policy after growth in services and manufacturing weakened, underscoring challenges for the nation’s leaders as they open the annual session of parliament tomorrow. Expansion in industries including retailing, transportation and banking was the slowest in five months in February, an official survey of purchasing managers showed yesterday. Gauges released March 1 pointed to manufacturing growth cooling.
Haruhiko Kuroda said that the Bank of Japan (8301) will do whatever is needed to end 15 years of deflation should he be confirmed as governor and indicated that open-ended asset purchases could start sooner than next year. “I would like to make my stance clear that we will do whatever we can do,” Kuroda, president of the Asian Development Bank, said at a confirmation hearing in the parliament in Tokyo today. The central bank hasn’t bought enough assets and should consider buying large amounts of longer-term bonds, he said. Prime Minister Shinzo Abe’s nomination of Kuroda has spurred forecasts for more aggressive easing to revive the world’s third-biggest economy after Masaaki Shirakawa exits the job on March 19.
The Czech central bank will probably need to sell the koruna to weaken the currency in the second half of the year, Governor Miroslav Singer said. While currency intervention isn’t currently necessary, the Ceska Narodni Banka’s board will debate at its next meeting whether to enter the market, Singer told the Prague-based Euro magazine, according to a transcript of the interview published on the weekly’s website yesterday.
EUR/USD: The EUR/USD traded at two and a half month low after data showed that the U.S. manufacturing sector expanded at its fastest pace since June 2011 last month and a separate report showed that U.S. consumer confidence rose in February. Today, the pair was trading flat at 1.30120 at the time of writing as investors are waiting for some news and data to get some visibility. Events likely to affect the pair today are the Spanish Unemployment Change (Forecast: 77.50K – Previous: 132.10K), the Sentix Investor Confidence (Forecast: -5.2 – Previous: -3.9) and the PPI (MoM) (Forecast: 0.5% - Previous: -0.2%). In addition, France will hold its French 12-Month/3-Month/6-Month BTF Auction. Later in the day, the U.S will release the New York NAPM and the Global Semiconductor Sales (MoM). U.S will also hold 3-Month and 6-Month Bill Auction. The Finance ministers from the 17-member single-currency bloc meeting in Brussels today will also affect the movement of the pair. In the week ahead, the events likely to bring fluctuations on the pair are, Tuesday; the euro zone will release final data on service sector activity, while Span and Italy will release individual reports. The bloc will also produce official data on retail sales. While in the U.S., the ISM will release a report on service sector activity. Wednesday; the euro zone will release data on fourth quarter gross domestic product. On the other hand, the U.S. will publish data on ADP nonfarm payrolls. The U.S. will also release data on factory orders and crude oil stockpiles. Thursday; The ECB will announce its benchmark interest rate; the announcement will be followed by a post-policy meeting press conference with President Mario Draghi. Meanwhile, the Germany will produce data on factory orders. While the U.S. will publish the weekly government report on initial jobless claims and data on the trade balance. Friday; Germany will release official data on industrial production. On the other hand, the U.S. will release data on nonfarm payrolls and the unemployment rate and data on average hourly earnings. The resistance level is at 1.33198 and the support level is at 1.28790 on the weekly chart.
USD/JPY: The yen strengthened against all of its 16 major peers as signs Europe’s debt crisis is deepening boosted demand for haven assets. The yen gained even after the nominee to become the next Bank of Japan (8301) governor pledged more monetary easing to defeat deflation. Today, the pair was trading at 93.417 at the time of writing after the release of Japan’s February monetary base report. In the week ahead volatility is expected on pair as a few important economic data will be released in both the U.S and Japan. Tuesday; Japan will publish government data on average cash earnings. While in the U.S., the Institute of Supply Management will release a report on service sector activity. Wednesday; the U.S. will publish data on ADP nonfarm payrolls. The U.S. will also release official data on factory orders and crude oil stockpiles. Thursday; The BoJ will announce its benchmark interest rate. The rate announcement will be accompanied by the bank’s rate statement, which contains important insights into current and future economic conditions from the bank’s perspective. The central bank will hold a press conference to discuss the monetary policy decision after the rate announcement. While the U.S will publish the weekly government report on initial jobless claims and official data on the trade balance. Friday; Japan will release official data on the current account and revised data on fourth quarter economic growth. On the other hand; the U.S. will release government data on nonfarm payrolls and the unemployment rate and data on average hourly earnings. Market participant should also monitor data and news in the Eurozone to better assess the trend of the pair as they will affect market sentiments for risky assets. The resistance level is at 94.546 and the support level is at 92.764 on the weekly chart.
Gold: The yellow metal traded lower on Friday on speculation the Federal Reserve might end its bond-buying program sooner-than-expected continued to dampen the appeal of the precious metal, after data showed that the U.S. manufacturing sector expanded at its fastest pace since June 2011 last month, while a separate report showed that U.S. consumer confidence rose in February. Today, the commodity was trading slightly higher at 1578.089 on market corrections and on news that China’s foreign currency reserves, which have surged more than 700 percent since 2004, are enough to buy every central bank’s official gold supply -- twice. However, sentiments remain fragile as Euro-area finance ministers meet in Brussels today to discuss issues including a bailout for Cyprus as Italy edges closer to a new election. Investors should be prudent on the commodity and closely watch the trend of the USD for some visibility as gold prices often move inversely to the U.S. dollar. In the week ahead, gold traders will be focusing on interest rate decisions by the European Central Bank, the Bank of England and the Bank of Japan. In addition, Friday’s data on U.S. nonfarm payrolls will be closely watched as investors attempt to gauge the strength of the economic recovery. The resistance level is at 1621.464 and the support level is at 1552.607 on the weekly chart.