The more things change, the more they stay the same

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The more things change, the more they stay the same. After being away for almost one week, as I return this morning, it almost seems as if we’ve stood still in terms of rates. While the EUR had made some upward moves over the last few days, once again it remains under pressure as traders anticipate tomorrow’s meeting of the European Central Bank.

The EUR is being pressured as traders are expecting some comment from tomorrow’s meeting regarding economic stimulus in the near future. There is also a possibility, although a slim one, that the ECB lowers rates from their present level at 0.75%.

The Eurozone economy continues in recession and the jobless rate has gotten a bit out of control. Yesterday it was announced that unemployment had risen to a record 12% in the first two months of 2013. While most analysts expect the ECB to hold rates, the comments from ECB President Mario Draghi will once again take center stage. He is expected to comment on the situation in Cyprus and will make it clear that the situation there was unique and will not be repeated in the Eurozone. Over the past few months, the comments from President Draghi have propped up the EUR after economic weakness has driven it lower.

Technically, strong resistance for the EUR remains at the 1.2930 level, but there are levels ahead of that at 1.2860 and 1.2890. On the downside, the support at 1.2780 is the first level to watch. A break there will see a move towards 1.2740.

For the time being, the market is looking positively on “risk” as the DOW made a new high yesterday and this has helped the “risk” currencies, AUD, NZD and CAD strengthen overnight The AUD was also given a boost as RBA Governor Stevens saw his term extended by three years. He is looked upon as a strong governor and recognized as one of the best policy makers. The EUR, GBP and JPY were all under pressure ahead of the trio’s central bank meeting’s tomorrow. There are no real rate surprises expected at these meetings, but traders remain somewhat tentative regarding these currencies. New BOJ Governor Kuroda is expected to present a more dovish approach than his predecessor. There are rumors that the BOJ will boost asset purchases by about JPY 1.2 trillion per month.

The USD/JPY technically is expected to test resistance at the 93.80 and 94.10 levels. Any move lower in the USD/JPY would be considered a buying opportunity according to traders. At the next BOJ meeting on April 26-27, semi annual forecasts are expected to be revised.

US ADP number is due out this morning and it is expected to be around 200,000, which would be slightly higher than last month’s 198,000. A good number here will get traders excited about Friday’s Non-Farm Payroll release. Early indications for that number also center around the 200,000 level. Last month’s number was 236,000. We will talk more about that tomorrow.

As for today, look for continued pressure on the EUR, although I would not expect any real significant moves today. We should test 1.2780, but that probably is as far as we go.

Further reading: 5 Most Predictable Currency Pairs – Q2 2013

Get the 5 most predictable currency pairs

About Author

Matthew Lifson is a Foreign Exchange Trader and a Market Analyst. with Cambridge Mercantile Group.

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