Higher-Yield Currencies rise as Global Stocks gains

Trading seemed to quiet down even further on Wednesday as the Easter holidays loom ever larger on the horizon while the economic data calendar had nothing of great relevance to spice up the FX markets. EUR/USD edged lower as traders, in the absence of any new impetus, tried to push for stops at 1.3150. They failed thanks to Asian sovereign demand and had to cover their shorts. EUR/JPY also rose thanks to London fixing demand from a UK name. The JPY received a boost later as talk swirled that a larger than forecast fiscal stimulus package of JPY 15 trillion is in the offing. Risky assets received a further fillip when reports predicted that US insurers would receive more government aid. However, equities topped out and FX markets had a reality check after the FOMC minutes revealed that the Fed is less than optimistic about a speedy turn around and it�s forecasts for 2010 have been scaled back to reflect this. USD majors saw rather subdued volatility in thinning trading ahead of the Good Friday holiday, maintaining in 50 pips ranges across the board. EUR/USD remains contained by 1.33, GBP/USD backed away from a retest of intraday high at 1.4750, and USD/CHF found selling interest just above 1.15.

[B]News and Events:
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Trading seemed to quiet down even further on Wednesday as the Easter holidays loom ever larger on the horizon while the economic data calendar had nothing of great relevance to spice up the FX markets. EUR/USD edged lower as traders, in the absence of any new impetus, tried to push for stops at 1.3150. They failed thanks to Asian sovereign demand and had to cover their shorts. EUR/JPY also rose thanks to London fixing demand from a UK name. The JPY received a boost later as talk swirled that a larger than forecast fiscal stimulus package of JPY 15 trillion is in the offing. Risky assets received a further fillip when reports predicted that US insurers would receive more government aid. However, equities topped out and FX markets had a reality check after the FOMC minutes revealed that the Fed is less than optimistic about a speedy turn around and it�s forecasts for 2010 have been scaled back to reflect this. Trading during the Far East time zone was aimless to say the least. All currency pairs were confined to narrow ranges and flows were never more than light and sporadic. Traders are reluctant to do too much ahead of what is the biggest day this week on the economic data schedule and also ahead of the Easter weekend. The Bank of England is expected to leave rates unchanged at 0.5% today though there may be something interesting in any accompanying statement. USD majors saw rather subdued volatility in thinning trading ahead of the Good Friday holiday, maintaining in 50 pips ranges across the board. EUR/USD remains contained by 1.33, GBP/USD backed away from a retest of intraday high at 1.4750, and USD/CHF found selling interest just above 1.15. AUD/USD was last seen making another foray above 0.71, unable to take out 0.7050 after poor jobs data (Unemployment rate came out at 5.7% from 5.4% last month), while NZD was a clear outperformer, gaining against both USD and the Aussie. Japanese Yen was once again oscillating around 100, however JPY sellers were unable to push EUR rate above 133.00 Unemployment in Switzerland remains steady with 3.3% from 3.1% last month.

[B]
Today’s Key Issues (time in GMT):[/B]

12:00 EUR German Industrial Production s.a. (MoM) 3.1% vs. 3.7%
12:00 EUR German Industrial Production n.s.a and w.d.a (YoY) -21.7% vs. -19.3%
13:00 GBP Bank of England Interest Rate Decision 0.50% vs. 0.50%
13:00 CAD Unemployment Rate (MAR) 8.0% vs. 7.7%
13:00 CAD Net Change in Employment (MAR) -50.0K vs. -82.6K
14:30 CAD International Merchandise Trade (FEB) -1.2B vs. -1.0B
14:30 CAD New Housing Price Index (MoM) (FEB) -0.5% vs. -0.6%
14:30 USD Trade Balance (FEB) -$36.0B vs. -$36.0B
14:30 USD Import Price Index (MoM) (MAR) 0.9% vs. -0.2%
14:30 USD Import Price Index (YoY) (MAR) -14.7% vs. -12.8%
14:30 USD Initial Jobless Claims (APR 4) 660K vs. 669K
14:30 USD Continuing Claims (MAR 28) 5800K vs. 5728K
18:15 USD Fed’s Stern Speaks in Sioux Falls, South Dakota
19:00 USD Fed’s Hoenig Speaks in Tulsa, Oklahoma, on U.S. Economy

[B]The Risk Today: [/B]

[B]EurUsd:[/B] EURUSD bounced right from support at its 100-day average and Mar-30 low (1.3115/50) yesterday. Into the holiday weekend, we expect trading volumes to be light and for the market to hold within the wider 1.3150/1.3540 range. Next week, we would be looking for renewed buying interest though a recovery above 1.3540 is needed for more sustainable gains

[B]GbpUsd:[/B] While allowing for a further unwind of overbought momentum readings, we expect further gains next week especially if the market remains above 1.4375/90 (channel base). Above 1.4985 (Feb peak) is needed to resume the uptrend to 1.5190.

[B]UsdJpy:[/B] Demand near the 200-day average (99.10) and above the old breakout area near 98.80 is an encouraging sign for gains into next week.

[B]UsdChf:[/B] USD/CHF is trading within the lower half of its 2.5 standard deviation bands and while this remains the case the risks are for a return to the range lows near 1.1165.

[B]Resistance and Support:

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By[B] Loic Bondiguel [/B]- ACM Advanced Currency Markets, Geneva, Switzerland