The Yen hit a record low against the Euro on Monday as Group of Seven finance officials did not single out the Japanese currency’s weakness at the weekend meeting. The G7 repeated its call for exchange rates to reflect economic fundamentals, and requested again from China for greater currency flexibility. Analysts said European officials seemed to have softened their complaints about the weak Yen after this meeting.
Traders said the lack of surprises from the G7 Washington meeting appeared to give a green light to carry trades, in which investors borrow funds in low-yielding currencies such as the Yen to invest in higher-yielding currencies. EurJpy hit 162.42 high this morning, a record high since the single currency was launched in 1999.
News and Events:
The Yen hit a record low against the Euro on Monday as Group of Seven finance officials did not single out the Japanese currency’s weakness at the weekend meeting. The G7 repeated its call for exchange rates to reflect economic fundamentals, and requested again from China for greater currency flexibility. They used the save wording in its press-report as its February meeting in Germany. Traders said the lack of surprises from the G7 Washington meeting appeared to give a green light to carry trades, in which investors borrow funds in low-yielding currencies such as the Yen to invest in higher-yielding currencies. Analysts said European officials seemed to have softened their complaints about the weak Yen after this meeting.
EurJpy was up 0.51% to 161.32 on Friday and hit 162.42 high this morning, a record high since the single currency was launched in 1999. UsdJpy rose to its highest since late February at 119.67 before closing at 119.27 unchanged on Friday. EurUsd edged up to a two-year high 1.3577 this morning and is approaching the all-time high of 1.3666 from December 2004. GbpUsd went up 0.35% to 1.9864 on Friday and rose up to 1.9895 high this morning. GbpJpy was also up this early session to 237.80. The Yen remains pressured against other currencies for now due to expectations that more carry-trades are building for one-sided bets.
Today’s Key Issues:
GB 8:30 GMT: March PPI Input 0.4% to 1.9% vs 1.3% (MoM) and -1% to 1.2% vs -1.1% (YoY), PPI Output 0.2% to 0.5% vs 0.3% (MoM) and 2.1% to 2.4% vs 2.2% (YoY)
Euro 09:00 GMT: March Euro-zone CPI 0.6% to 0.7% vs 0.3% (MoM) and 1.9% unchanged (YoY)
US 10:30 GMT: Fed’s Poole speaks on demographics and Trade in Brussels
CAD 12:30 GMT: February New Motor Vehicle Sales -4% vs -3.3%
US 12:30 GMT: March Advance Retail Sales 0.1% to 0.5% vs 0.1%, Less Autos 0.7% to 0.8% vs -0.1%, April Empire Manufacturing 7 to 7.5 vs 1.9
US 12:45 GMT: Fed’s Plosser and Noyer speak on European Union Expansion
US 13:00 GMT: February Net long-term Treasury International Capital Flows $80.8B to $85B vs $97.4B
US 13:45 GMT: Fed’s Fisher speaks in Texas on fiscal issues and economy
Euro 16:00 GMT: ECB’s Trichet holds a speech in New York
US 17:00 GMT: April NAHB Market index 34 to 38 vs 36
The Risk Today:
EurUsd maintains a bullish note having once again broken to new highs. This bullish trend has recently pushed above 1.3481, March 2005 high, leaving it with little resistance until the 1.3666 all-time high from end December 2004. Friday’s intraday low of 1.3482 marks initial support. Further advance may clear again 1.3554 Friday’s high and 1.3577 intraday high.
GbpUsd has pushed above the 1.9850 Pivot point, clearing the way for a run at the 1.9917 late January trend high. Initial support is at the 1.9864 Friday’s high. Only a break of 1.9850, former resistance, would put the bull trend on hold in the short term. Today high 1.9895 marks the initial resistance.
UsdJpy maintains a firmer tone with the USD continuing to pressure resistance at 119.49 (61.8% retracement of the 122.20-115.15 decline), a clear break would open the 76.4% retracement level at 120.54. Strong and pivot supports are located at last Friday’s reaction low at 118.21 and 118.50 pivot.
UsdChf tested lower the 1.2121 support and holding over it for now. Lower than that, there is little support till the 1.2030 mid-March low, expected Friday’s low 1.2068. Resistance this morning comes in at Friday’s intraday high of 1.2190 - expect further choppy price action to dominate.
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Resistance and Support:
By Jean-Claude Braha, ACM Advanced Currency Markets, Geneva, Switzerland