Forex Trading Library

Markets seem relaxed while waiting for major and possible disturbing news

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Today’s market news feature the following events:

Oil quotations remain near the local lateral zones (47.10 – 47.75 for WTI and 56.00 – 54.70 for Brent) as discussions aren’t finished yet. It is expected that after the returning of the head of Russian diplomacy on the talks to be announced a temporary agreement on Iran’s nuclear operations. It’s remarkable that the market is being calm while the expected reaction, if an agreement is announced, would lead to a significant depreciation of the price.

Until a convention is adopted (hopefully this week), the price of oil (especially WTI) will have to deal with the publishing of the U.S. inventories due to be released today. The recent data and market reaction have taught us to always watch for a positive correction, even if the inventories are rising.

EURUSD decided to test the 1.0713 support level and now is heading towards the 1.0800 resistance level. Market participants are still undecided on the direction of the European currency as Greece’s financial problems aren’t solved yet. Discussions didn’t reach an agreement, making George Soros’s words plausible: “Greece has 50% chance to leave the Euro zone”.

For the time being, the euro is dragged down by the 41 billion euro, which have been used by the ECB to buy government bonds, while in the United States the CB Consumer Confidence index rose to 101.3 points and the Pending Home Sales made an incredible jump to 3.1%. In terms of the ascending trend of the American dollar, it’s true that the majority of the economic factors offers support to that tendency, but the economy could not cope anymore with the currency appreciation. Lacker, a voting member of the FOMC this year, declared yesterday that the relative strength of the U.S. economy versus foreign economies seems to be driving the value of the dollar, but he expects those effects to be transitory this year.

On the other side of the Pacific Ocean, the easing monetary policy seems to develop strong roots. PBOC announced that weak demand, the contraction of the manufacturing sector and the decreasing inflation may determine the bank to extend its stimulating measures. In the same tone, Japan is signaling that is preparing some dovish surprises. Kozo Yamamoto, an expert on monetary policy in Abe’s Liberal Democratic Party, declared that “further monetary easing is absolutely essential”. The Monetary Policy Statement on the 30th of April is due to release information about the BOJ’s decision on interest rates and commentary about the economic conditions that influenced their decision. Chances are increasing for the bank’s official to announce new stimulus measures.

USDJPY is already hurt by the dollar’s appreciation and, in the long term, is trading in the 116 – 122 range. The Japanese currency is already highly depreciated so we need strong monetary decisions in order to see the currency pair near the 2007 resistance zone.

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