Good morning. Well quite what to make of yesterday’s markets is a tough one.

The sell-off in equities was really quite significant but that scale of panic and volatility simply wasn’t translated into the FX market even as the DAX sank by nearly 250 pips on the day at one stage yesterday afternoon there wasn’t a significant risk off trade in FX land.

The USDJPY never really traded underneath 81.00 all afternoon and if anything it actually traded higher.

EURJPY did slip back as the EURUSD fell through moving average support at 1.3121 and then at 1.3114, but the moves really weren’t significant.

The failure of the EURUSD to fall back through 1.3100 was key to me really as I said in yesterday’s update; a break back under that level would have flipped momentum.

I cannot really say who brought it back off the lows last night, but as the Dow rallied the intraday market was squeezed and we did the usual, ending the day in the middle of the range. The close for the EURUSD at 1.3156 was entirely inconclusive.

Technically the price is getting very congested now in this pair as we can see from the medium term daily moving averages. The 30 day is at 1.3185, the 50 day at 1.3205 and the 90 and 100 days at 1.3115 and 1.3118.

The 100 day is falling and the 90 day is rising. Well that spells convergence to me and we should get a break out before too long I assume?

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Having said that, conversations I have had already on both sides of the pond this week would support the notion that there is a general feeling of apathy towards the currency as a lot of the players have had the appetite beaten out of them already this year.

You can blame one or two players for that; who seemingly want to take all from themselves and leave nothing for the next man.

Those players responsible would do well to remember that continuing in this fashion may not serve them well in the long run.

The AUD has fallen overnight following a weaker than expected Q1 CPI release which came in at +0.3% on the quarter against general expectations of a 0.6% increase. That news saw the AUD fall sharply from 1.0325 to 1.0255 almost instantly.

The price has rebounded after the European opening but that move looks more linked to JPY weakness and AUDJPY buying – more on the JPY side of the equation in a minute.

EURGBP did eventually fall through what was reportedly quite substantial buying interest at 0.8160. Once the level was broken follow through was however minimal on this as the price slipped to around 0.8150.

That’s probably because of the proximity of the very important UK Q1 GDP data due at 9.30am tomorrow.

The consensus is that the economy will evidence growth at 0.1% versus a contraction of 0.3% in the final 3 months of 2011.

Clearly a second quarter of negative growth will be really badly received in the short term but a better than expected number should see the currency push higher again.

As usual it will be important to see if there is any adjustment to the last figure- more on this tomorrow.

Asian equity markets have ended the day mostly lower again today as all those concerns raised yesterday are still live.

There’s no change in anything in Europe, the outcome of the French elections is still very uncertain, the Dutch government situation is still unresolved and Spain and the other peripherals are as they were.

The ratings agency Moody’s has warned the Dutch government regarding the potential implications for the country’s AAA rating if their budget issues are not resolved.

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The failure of the Dutch government to agree on the necessary austerity in order to bring their budget back inside EU guidelines makes a such constraints a complete joke when one looks at the budget messes in the peripheral countries including Italy.

This whole European project is now an utter joke if the Netherlands are to fall fowl of Brussels on this issue.

There is little in the way of data today in Europe and the focus will be on the US consumer confidence, housing and Richmond fed data this afternoon.

Ahead of that we have debt auctions from Holland, Spain and Italy all of which could have a significant impact on the markets if the outcome, or take up, is substantially below expectations.

The JPY has weakened in early trade as the USD lifts from earlier levels around 80.85 to around 81.15 on talk of a sizeable move by the BOJ to add some 5-10 trillion JPY in additional QE when they decide on policy this Friday. That speculation has been fuelled by comments from BOJ officials this morning.

Equity markets are higher this morning, following yesterday’s rather nasty sell-off and that has helped the risk appetite across the board.

That is also helping the JPY weaken across the board and also helping to propel Gold higher. Wherever gold goes in the short term looks entirely linked to the risk dynamic.

There isn’t much more to add today. It is likely to be just as difficult and uncertain as it was yesterday, so apart from really short term trading dynamics the picture looks unfortunately just as inconclusive as it did yesterday.

Good morning. Well Friday saw the release of a much stronger than expected UK retail sales report for March. That helped boost the pound as GBPUSD rose above 1.6100 on the news.

However, given the strength of these numbers the move in both GBPUSD and EURGBP was actually quite disappointing in truth.

The increase of 1.5% on the month more than wiped out the adjusted 0.7% decline for February and on an annual basis, importantly without fuel sales, recorded growth of 2.8%.

Now pinch me if I am seeing things here, but given all the negativity in recent weeks out there, that’s pretty good isn’t it?

Just goes to show that journalists and reporters can try to talk things down but they don’t always have the desired impact. For the life of me I can’t understand why certain members of that tribe are always so pessimistic.

The simple truth to me is that things are improving and should continue to do so as the feel good factor of the Olympics begins to take more of a grip. Whether or not that will continue after the games is much harder to judge.

The move higher in the GBPUSD helped the EURUSD through 1.32 as well. I think that there were stops placed above 1.3210 (the high reached the previous week) and they were clearly the target for removal.

I think that way because once again the price just rallied above the level, reaching 1.3228 on Friday evening and that was as far as it got-as I said no follow through and that smacks of stop loss removal and not a genuine directional move.

The one thing that was bugging me all day on Friday and I think I mentioned it in the update as it had been on my mind for the past few days, was the failure of the Gold price to react with the EURUSD as it traded higher, or with equities.

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The US markets have recovered a lot of ground in the past fortnight as the Dow heads back above 13,000 but Gold has so far simply failed to take a lead from anything that might have helped it to the upside. Perhaps there’s demand somewhere out there but I don’t see it.

It is also possible that there’s a more significant reason for the gold price not moving-more in a second on that.

The news out on Friday that the IMF managed to secure around $430 billion in fresh commitments from a number of governments was initially heralded as great news and a fillip for the G20 meeting that was used as the backdrop for the change. More like a US style fund raiser if you ask me.

However there are a couple of points to note on this. That number was actually well shy of the $600 billion that IMF managing director, Christine Lagarde had hoped to raise and more importantly the main protagonist at such a fund raising event refused to cough up.

The move by the UK’s Osborne to pledge £10 billion doesn’t seem like a shrewd political step either at home or abroad at this point either, especially when one views the US position and the proposals by Canada to make it extremely difficult for European countries to tap the increased resources.

I will say one thing for Osborne; at least all his comments and decisions seem entirely removed from any political dissuasion, judging by the number of times he’s shot himself in the foot politically-perhaps there’s more substance to this man than many give credit for.

Looking back at Gold and the IMF story-increased contributions imply potential central bank sales? No talk yet, but don’t be surprised if there’s some hint of that capping the price of that at the moment.

The JPY is a little stronger this morning, helped by a poor equity market performance in Asia overnight.

That was kicked off by reported concerns over the growth prospects for the Chinese economy once again as well as some reported concern over the outcome of the French elections.

I don’t see the markets really giving that outcome much focus at the moment despite Sarkozy coming second after the first round.

More worryingly to me are the developments in Holland. The potential for a budget impasse here that could see a risk to the country’s AAA rating is live according to many analysts if the spending limits are not brought into line with EU mandate requirements.

We should watch the developments here closely. Dutch spreads have already widened nearly 20bp above Germany since last week. If that continues then it’s just another reason to avoid the currency.

There has been much talk as to why the EUR has been so resilient in the past year. There is no denying that it has, and given all that it has had thrown at it, it has done remarkably well to still be knocking around the 1.32 mark.

Several pundits have been drawn to the conclusion of where the price would be now if the situation in Europe wasn’t where it was.

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Well, whilst that’s a valid argument it’s a bit like saying that I would be alive if I wasn’t dead already- pointless. One could say the same about the EURCHF couldn’t one? We are where we are and it’s where we are headed from here that matters not what might have been.

I continue to see no earthly reason to buy the single currency and from all that I can see it still overvalued versus the GBP and the USD in particular. Now this week’s US FOMC decision could put the spotlight back onto the US economy.

The recent slippage in the US economic data is something that the FOMC will be watching closely so we need to watch any accompanying statement from the committee when they leave their benchmark unchanged on Wednesday.

This morning the release of the weakest set of German manufacturing PMI data in over 2 years has severely impacted the markets. Gold has fallen sharply as stops have been triggered on the news.

That move endorses what I said earlier about the metal’s inability to rally in recent sessions on the back of what was a better risk environment. The same news has also impacted the EURUSD, which has fallen back underneath 1.3150.

The whole mood this morning has therefore shifted once again. Risk is coming off and that’s had a further impact on the JPY which has strengthened further, testing 81.00 as EURJPY slips back. EURGBP is holding on to the 0.8160 region still as reported bids are still said to lie around that area.

Despite this latest news the EURUSD is still rather inconclusive inside the wider 1.30-1.32 range. A break back underneath 1.3100 would sour the mood further but ahead of that there is support around the 1.3130 region.

Good morning. Yesterday the EURUSD was friendless as the price fell through 1.32 and then 1.3150 as the ECB unsurprisingly left interest rates unchanged.

The move through 1.3150 happened even as there was a degree of uncertainty surrounding what ECB president Mario Draghi might say at the subsequent press conference following the decision.

In the event he delivered a rather downbeat assessment for the Euro zone which was actually refreshingly realistic. That helped send the EURUSD lower, but it stalled in its descent above 1.3100.

There was talk of a large Asian barrier option at that level and certainly good buying from several Asian players just ahead of this capped the down move.

The move higher into the close of the US session has been hard fought with progress managing got recapture the 1.3160 level so far this morning.

Yesterday the one concern for the single currency was the deterioration of the situation in Spain as 10 year yields hit their highest level in 2012 at 5.75%.

The mismanaged auction yesterday was partly to blame for that as there was not the full amount raised. That has been widely reported since then but the move higher in Spanish yields was certainly one catalyst for the overly large sell-off in European equities.

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The fact that Spanish yields are still around 5.65% this morning signals warning bells to me.

I will reiterate what I have said before, with no growth, 23% unemployment (and now new figures show unemployment in the under 24′s at over 50%) and economy build on largely on an overseas property boom that has imploded I see little hope that this country can recover without at least a massive aid program. Lastly Spain needs a significantly lower currency.

Yesterday the EURJPY did break the key levels at 108.75 and 108.55, sending the price back to the 107.85 support area before a bounce set in.

That has stalled again around 108.60 in late US trade and sent the price back to 108.00 overnight.

The early lift this morning has also stalled again around 108.35 so far this morning and if 107.85 gives way then that could open a path to the 106.00 region.

Gold did what it said on the tin yesterday and once the overnight low around 1640 was breached it fell sharply to 1628.

The rest of the day saw a continual raft of selling as the price ground its way down to as low as 1612 before lifting back as US equities recovered earlier heavy losses to end the day down 124 at 13,074.

The range so far this morning, despite lifting to the 1630 level has been tight and overall the price still looks heavy to me.

The USDJPY tried to rally yesterday but the general risk off and push lower in equities saw some heavy sellers emerge again above 82.75 and the price duly fell back to 82.10 before another attempt to push it higher again ran out of steam around that 82.75 level again.

It has fallen back in Asian trade as equity markets there fall again overnight. The return of risk off has benefitted the JPY and that flies in the face of the FOMC minutes supporting the US currency. As usual risk off sees a mix of USD and JPY buying as both currencies outperform.

The AUD did trade higher overnight, reaching back above 1.0300 earlier this morning but that has since fallen back as it slips back versus the CAD and the JPY.

The move lower in AUDCAD still looks like it has further to run, perhaps towards parity, but with oil prices slipping back towards $100 that may undermine support for the CAD.

This morning the main event is the BOE interest rate decision at 12pm. No change is expected on the headline rate or the level of asset purchases.

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Now if that isn’t the case then there are clear implications for the pound as there are also from any accompanying statement that hints at any indication that the bank may be done with these special measures.

Earlier the SNB released their March foreign currency reserves, which showed an adjusted increase of CHF 10 billion from the previous month.

Clearly that would indicate that they have been active in the markets but that can’t always be taken as a given because of many other factors that might influence this data. The EURCHF didn’t budge a pip on the news.

Tomorrow the European markets are closed but the US is open and we will have the release of the March payroll data. There will however be no equity or futures markets open, so it could be a very dangerous day.

On the other hand there will be very few participants so of the numbers are entirely in line with expectations then it could be very quiet.

It really depends on the numbers here. The expectation is for an increase in non-farm payrolls of around 210k, down slightly from last month’s 227k with the underlying rate remaining unchanged at 8.3%.

Naturally an extreme number in either direction will have a significant impact. Yesterday’s ADP number of private payrolls showed an increase entirely in line with expectations at 209k which if the correlation between that and the wider government figures remains intact would point to another solid release tomorrow.

If that’s the case then it merely underlines the direction for the US currency versus the EUR as far as I am concerned.

My prognosis for a lower EURUSD was never based on a break up or a falling apart of the Euro zone, it was entirely based on the economic fundamentals playing out in the coming year.

I still stand by that in the longer term analysis of where I think the EURUSD will go as the bigger picture hasn’t changed as far as I can see.

Good morning. Well the whole dynamic shifted last night following the release of the latest US FOMC minutes from their last meeting.

As I suspected that evidenced a much more hawkish tone and almost certainly quashed any idea that QE3 is on the agenda unless there’s a significant change in pace of the economic recovery.

Only 2 members of the voting panel thought that there was any need for further QE which was a significant reduction on what was previously thought to be the case.

That perhaps wasn’t such a surprise to me as it was to the rest of the market as I did point out that we may see this in yesterday’s update.

The dollar, gold and equity markets all reacted to the news very swiftly and the EURUSD fell swiftly under 1.3300 then it took out stops underneath 1.3280 and later at 1.3250.

That momentum continued into the close as the price ended the US session around 1.3230. Gold fell very quickly on the news as trend line support around $1667 caved in very quickly.

The price found some support around $1640 and lifted back to around $1648 into the Asian opening. The current price around $1644 at 6.30am this morning looks very vulnerable to me with the $1625 previous low in its sights.

Personally I think this one looks like an accident waiting to happen now and I could argue the case for a substantial move lower from here. As to whether that plays out and by just how much in the short term could rest on the strength of the US payroll report due out on Friday.

The US equity markets reacted negatively to the Fed minutes but the falls by the close weren’t actually that bad as it could have been in a more risk averse environment.

The USDJPY shot higher as significant Japanese exporter offers were removed above 82.50 and the price accelerated towards 83.00.

That level has held overnight and it would appear that there is perhaps some more interest from the same around there. A break of the 83.30 level could now open a retest of the highs above 84. So far in Asia the price has slipped back, largely as a result of risk off and EURJPY sales.

The EURJPY looks very vulnerable to me if the 108.75 level breaks and that could set up a move back to the 106 region. The AUD fell back on the Fed news and that was enhanced overnight following the release of another trade deficit where a surplus had been expected.

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It seems that the level of the currency and the slowing economic activity in China were the two main reasons for the deficit.

The prospects for a cut from the RBA next month have just increased on the back of that data I think. The AUD looks like a sell on a rally and short term targets near 1.02 and 1.01 look highly achievable.

This morning we have a whole bunch of European services PMIs as well as that for the UK at 9.28am. Following that we have EU retail sales at 10am and German factory orders at 11am.

After that we have the small matter of the ECB interest rate decision at 12.45pm followed by their usual press conference at 1.30pm.

Now I don’t think anyone expects any change in official policy here but the one thing that is concerning the markets is the possibility that the ECB may lower its growth forecasts. If that happens then I think the EURUSD will not react well to that.

The price is lifting after the opening this morning, following lows overnight near 1.3180. I think the proximity of this event today is probably helping to lift the price a little, but I don’t think we will see too much retracement from here.

It looks like a sell to me on any rally from here but it is not an easy call ahead of the US payroll report on Friday and the looming long Easter weekend.

EURGBP has also fallen back following yet another squeeze to the upside yesterday. The prospects for this to fall remain live as far as I am concerned. The recent data has been good from the UK and lower EURUSD should help the direction.

It won’t be easy of course and we will need to see a good service PMI from the UK this morning to endorse the direction ahead of whatever emerges from the ECB later on.

Once again I think the prognosis for the pound to outperform the EUR remains entirely intact and I am still looking for the substantially lower levels I identified to you already. I don’t expect anything from the BOE when they meet tomorrow to also decide on interest rates.

This morning European equity markets have opened lower, which given the overnight news can hardly be a surprise to anyone.

That risk off trade looks live therefore this morning and the real story for me is the return of the US currency. I think that the party for the EURUSD may just be over.

Good morning. Well, what a strange day yesterday was. It seemed that risk was back on the table during the morning, but once again the failure of the EURUSD to break higher above 1.3375 for the seventh time in as many days was against the grain of what was going on elsewhere.

The reason for that was the fact that a bank in London sold around 500 million EUR, pushing the price back under interim stops at 1.3350, then 1.3300.

The latter level coincided with the uptrend line on the 4 hourly charts rising from the 1.3005 low on the 15th March.

That was broken as the price fell rapidly to 1.3276. However that proved to be yet another technically induced false break.

The fact that as the EURUSD was being sold, USDJPY fell sharply too, initially breaking support at 82.50, then 82.30 and finally pushing underneath 82.00, triggering a good many stops under that last level.

There’s a rumour in the market that the last seller on the USDJPY is the same player who bought it up aggressively all Friday afternoon.

The fact that there were touted large option expiries for the 3pm Chicago cut at 82.25, 82.15 and 82.00 was also one reason why the market didn’t stand in the way of these sell orders.

What was strange however was the fact that the final push underneath 82.00 came well after the 3pm deadline after this order had gone through. I can only conclude that the proximity of stops underneath the 82.00 level made this a magnet for the stop hunters as well.

Now with the EURUSD coming off at the same time the EURJPY was in effect pulverized, sending it briefly underneath 109.00 in the process, down over 220 points from the highs seen around 111.15 during the Asian trading session.

Once again that was order based and had a good many traders and analysts pondering on just what the heck was going on. That’s simply because at the same time the DAX surged higher, recording levels over 100 pips to the better on the day.

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In addition the AUD and the CAD and Gold were entirely unmoved; in fact if anything all three were higher and were seemingly entirely disconnected with EURJPY, which after all is meant to be main barometer of risk.

Therefore in summary of all that we had the DAX closing up 109 points, the FTSE up 106 points, gold up over $15 by the European close and EURJPY was down at that time 200 pips at 109.20-work that one out?

Well I think it’s either a one-off order based move or it’s the start of something bigger in terms of a correlation unwind.

We have seen this sort of thing a lot recently in terms of disconnection which is why these markets are so treacherous at the moment; almost entirely random a lot of the time, impacted by whatever the next sizeable order hits the platforms.

There simply isn’t enough interest, depth or liquidity out there at times to allow anything sizeable to be absorbed and that’s why correlations are getting twisted and pulled around.

Yesterday the stronger than expected UK manufacturing purchasing managers index for March helped lift the pound. The GBPUSD rallied to 1.6060 as EURGBP fell back, triggering stops under 0.8310, reaching as low as 0.8395.

That was seemingly a clear break to the downside, but once again the move simply ran out of steam as the price lifted back to around 0.8320 after the London close.

Despite that move the numbers emerging from Europe and the UK continue to paint a picture of relative outperformance for the pound and I do expect this one to continue to lower which will most likely accelerate if the price closes under 0.8250 on a daily basis.

Overnight the EURUSD lifted briefly back above 1.3350, yet again endorsing the sideways nature of the current price action.

The move higher in the EUR was helped by a rapid sell off in USDJPY which fell under 81.80 as stops there were triggered shortly after the Tokyo opening.

That saw the price accelerate quickly to around 81.55 before another rally set in towards the London opening this morning taking the price back over 82.10.

As the USDJPY came off overnight that also impacted the EURJPY as well. That also fell back underneath yesterdays low, trading to 108.66 as the USDJPY touched 81.55. Now this move overnight sets up a potential triple top failure above 111.

The base line here looks to be around 108.45. A daily close under that level now could argue that we have a triple top in place.

Asian equity markets have closed mostly in positive territory; the only notable exception was the Nikkei which once again underperformed, closing down 37 at 10,077. Overall it was a relatively curtailed session for equity markets with China being closed for public holidays.

The RBA did leave interest rates unchanged overnight at 4.25%. The initial reaction was to take the AUDUSD higher on the news and it shot to 1.0460 as the news broke.

However that outcome was widely expected and that fact coupled with some really cautious accompanying comments from the RBA sent it back down just as quickly.

The price has steadied around the 1.04 level as European markets get underway this morning, but overall the AUD has lost ground versus most of its main counterparts. The AUDCAD has fallen back under 1.03 for the first time this year as the JPY and EUR rebound.

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This morning there’s not much data out of Europe with UK construction PMI and EU PPI (Producer Price Index) grabbing the limelight. Later there is a plethora of US data and the release of the Fed’s latest FOMC meeting minutes this evening at 7pm.

That latter event will be the most significant of the day as the markets will seek to glean more insight into future Fed policy.

Certainly a growing number of Fed voting and non-voting members are talking with a more hawkish bias in recent days and if that’s reflected in the minutes then we could see the markets react accordingly tonight.

As the markets begin another day all I am hearing from almost every commentator and analyst is just how weak the situation in Europe is.

Now that’s certainly true and I don’t see anything beyond Germany to get excited about, but I am at a loss to understand why the EUR is so resilient. Clearly the fundamentals are in place for the EUR to underperform versus all the other G7 currencies.

However that simply isn’t happening. Once again that looks purely down to positioning and perhaps it’s merely a case of waiting until the market either reduces its net short EUR exposure sufficiently or actually gets sucked into turning that around.

When and if that happens then the market will turn and the fundamentals will out, remembering that most of the time its positioning that determines direction until it finds itself out of line with the fundamentals, then the move tends to play out as it should.

European markets are opening in slight negative territory but so far with insufficient losses to have any impact on the currency markets.

The FX market is struggling for direction again this morning as gold too continues to trade sideways having enduring its quietest 12 hour range for some time.

The prognosis for the EURUSD is as it was and that doesn’t bode well for anyone looking for medium term direction.

Good morning. The first quarter came to an end on Friday and it was a mostly quiet end to the week. The EURUSD remained range bound for the whole day as cable tried to move higher into the close and finished on a positive note around 1.6010, just shy of the 200 week moving average which was at 1.6014 last week.

That moving average is still falling quite steeply and it is now around 1.5990 for this week. Despite being a positive weekly and monthly close the level was not necessarily of any technical significance. However the underlying tone for sterling continues to look positive as far as I can see.

The USDJPY drove higher into the close. There was clearly a very large buyer around on Friday afternoon as some very good sized sell orders that I heard of were absorbed with ease.

The close on Friday has seen some acceleration in Asia overnight as the price reached to its previous exhaustion level around 83.30. It is entirely possible that we’ll see further upside for this one ahead of the Easter weekend.

The combination of a weak JPY and a mood change in GBP is helping GBPJPY probe its 2012 highs again. At the same time EURGBP remains stubbornly in an ever increasingly tight range between 0.8320-60. The move lower on the close on Friday back under 0.8330 was immediately reversed in Asian trading. However, I do feel that the longer term charts on this continue to point the way lower.

The still significant long term undervaluation of sterling points to more downside to me on this cross because the same cannot be said of the EUR, which still knocking around its longer term moving averages.

Despite the pound regaining some ground versus the JPY and the AUD for example, its long term valuations still have a long way to go before one could say that those pairings in particular are even close to fair value.

Personally I think the protracted period of sterling undervaluation may be over and if I had to pick any currency out there with upside potential based on a move beyond its long term fundamentals then I would have to look no further than the pound.

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Now having said that it’s still a tricky one because of the propensity for the currency to have ‘black moods’ where the sentiment turns so negative so quickly as uncertainty still remains on the prospects for the UK recovery.

Taking all that into account, I think the longer term direction will see the EURGBP head back towards 0.8000 and perhaps even to 0.7500 and beyond. However, I would seriously have to reappraise that view if we move above the 0.8600 from here on in.

The AUD ended the month on a weak note as concerns still abounded on the potential for Chinese growth and the prospects for a cut by the RBA tomorrow.

That however was changed in a matter of seconds overnight as the price gap opened higher from the 1.0320 level to touch 1.0470 as a good many short positions were removed in the twilight hours.

The driver for that was the release of the latest Chinese PMI (Purchasing Managers Index) which actually recorded an 11 month high over 53, where the markets had been looking for something nearer the 50-51 mark.

At the same time the HSBC smaller companies Chinese PMI came in much weaker than expected at 48- so conflicting news there.

The AUD has pulled back a bit overnight and I still think its vulnerable overall to further selling pressure.

The consensus is still for the RBA to leave interest rates on hold tomorrow and this latest official Chinese PMI data has probably endorsed that. The chances for a cut look priced at around 40% just now.

As for the EUR and the ECB this week it is still a very tricky and uncertain picture. The ECB is due to decide on interest rates on Wednesday this week (brought forward from the usual Thursday meeting because of Easter).

Whilst I think that they should move to cut interest rates I don’t suppose that they will because of the hawkish Bundesbank influence of the board. Given the rising concerns on the periphery in general and Spain in particular its looks like madness to me for the council to be more concerned about inflation as opposed to a more growth based policy directive because Europe beyond Germany needs a lower currency to help spur growth in those countries saddled with too much debt.

Gold seems to have one eye on the EUR and the other on risk and equities.

It did move higher into Friday’s close as US equities regained more ground to finish the quarter in a much more positive position, but looking at the early moves in European equity markets this morning one could be forgiven for thinking that the price should be a little higher.

Hence I can only conclude that this is beginning to display the same sideways price action as the EURUSD.

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Therefore it’s a hard call on where we head to from here in the short term, and unless something significant breaks we may have to see more of the same ahead of the Easter break.

Therefore the current sideways price action in the EURUSD is very difficult to navigate. Whilst the price is nearer the upper end of its 2012 range it is at the same time apparently struggling to break higher beyond 1.34.

Technically, as I have said before a break above 1.34 opens a path to the 1.35 region and if that breaks we may see 1.3740. On the other side a break back underneath 1.3230-50 could warn that we are on the slide again.

This morning the markets will likely focus on the German and UK March manufacturing PMI’s due out at 8.53am and 9.28am respectively.

Following that we have the release of the Euro zone February unemployment data at 10am. The market looks set to react in a data dependent way just now so those releases may dictate the price action here this morning.

Later today we have some US data but really the big number is the US March payroll report on Friday. UK markets aren’t open for that release. I will look at this upcoming event in more detail tomorrow.

Overall therefore it’s quiet as I conclude this update. The USD and the JPY look weak and that’s being helped by the equity markets moving higher.

Risk is still the main driver and will likely remain that way until the ECB decision and US payroll reports later in the week.

Good morning. Well yesterday was very tricky indeed. The EURUSD fell back under 1.3300 triggering stops all the way through 1.3290, reaching as low as 1.3251 before lifting into the US close as the Dow rallied to end the day in positive territory having early faced triple digit losses as European equities fell back sharply.

Now despite the DAX being down nearly 150 points at one stage the EURUSD managed to hold onto key trend line support at 1.3250.

I didn’t think it would, but there seemingly weren’t the stop loss orders around in sufficient size to push it through rumoured strong buying interest around 1.3250.

The close on the EURUSD last night saw a push back over the 1.3295 ‘Bernanke’ break out and that kept positive momentum alive overnight and accounted for residual shorts being removed yet again as the price rose back over 1.3350.

The JPY strengthened overnight having failed to break back over 82.60 in late US trade, there was another raft of month end JPY buying in the Tokyo session that saw another move under the 81.90 level touched briefly yesterday afternoon.

That move helped all the JPY crosses move lower but once again that has been reversed overnight as the AUD, GBP and EUR all break higher again this morning and the USDJPY rebounds slightly above 82.10.

There’s no real data to speak of today either side of the pond and in all likelihood it wouldn’t matter anyway because a lot of players have closed their books for the financial year/month/Q1 end ahead of the weekend.

That could make for some testing trading conditions later on if the market is short on liquidity and some important news breaks.

There will also doubtless be some significant month end fixing orders to contend with at various times of the day that could impact any pairing, but most likely to affect GBPUSD, EURUSD, EURGBP and USDJPY as they are usually the most popular pairings.

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EU finance ministers will begin their 2 day meeting in Copenhagen today. The most important item on the agenda is the proposed enlargement of the ESM that I mentioned in yesterday’s update.

As usual the markets seem to think this is a done deal, but it surely will not be as simple as that.

Apart from anything else the odd 250 billion extra we are talking about doesn’t grow on trees and there is the small matter of who exactly would fund the enlargement, given that several members attending the meeting are already working to austerity budgets that they are struggling to meet and Germany’s enthusiasm for more financial commitment is very limited despite what Merkel may say.

Yesterday’s riots on the television in Spain gave me the distinct feeling of Déjà vu and it seemed just like the Greek riots of a couple of years past.

The fact is that the markets haven’t entirely woken up to the truth that Spain has a worse unemployment rate that Greece ever had at 25%, a huge drop off in industrial production and an economy that is in serious trouble.

Property prices are collapsing still and the growing burden of debt is clearly being swept under the carpet by someone. It is perhaps no wonder then that EU finance ministers are looking to increase the firewall.

Looking at the JPY which strengthened overnight as I said earlier; having removed stops yesterday afternoon underneath 81.95, it shot higher into the US close, helped by the move higher in US equity markets; that reversed all the day’s losses to close higher.

Now today we may see further JPY strength ahead of the weekend, but that will depend on any last minute shopping requirements and month end fixes that I already mentioned.

So far this morning it’s been very thin, very sporadic and extremely treacherous.

The early move in the GBPUSD; that saw stops taken out above 1.6005, catapulting the price to 1.6035 very quickly has just been reversed almost as fast, as the price just falls away to 1.5975 on very little volume.

The EURUSD has followed suit to some degree, having shot to 1.3375 again, largely helped by the cable move, it too has just fallen back.

There is talk of a large LHS EURGBP fix today, but I wouldn’t put too much faith in that because there will be lots of month/Q1 and financial year end fixes going through today.

Yesterday afternoon the risk off trade returned to haunt the markets. I am not quite sure what the catalyst was for the move but it looked linked to a number of factors, some out of Europe and some from the Middle East and China.

Whatever the main driver, the EURUSD fell back under initial support at 1.3320 then through 1.3300 and 1.3290 (where some serious bids were in place) and traded as low as 1.3278 before it bounced after the London close.

The equity markets had their worst day for several as European markets all closed in the red and the US benchmark, the Dow was down over 120 points at one stage.

The reason for the sharp bounce in the EURUSD from 1.3280 back to 1.3310 was on comments regarding a draft agreement to be laid out today on the ESM ceiling being enlarged from the current EUR 700 billion, to as much as EUR 940 billion. Now that’s clearly not a done deal yet, but the release of a draft agreement would make it seem pretty likely.

It has been reported that the EU finance chiefs will probably decide on this at a meeting in Copenhagen tomorrow. Well, the EUR shot higher when that little nugget hit the newswires, ratcheting from 1.3285 to 1.3315 in a couple of clips.

Despite that fillip the EURUSD didn’t make much further headway as there simply wasn’t seemingly many short positions in the markets.

Therefore all I can deduce in respect of yesterday’s EUR sell-off is that it managed to remove many recently established interim longs.

Had I been long then I would almost have certainly placed by stop under the break out level at 1.3295 and seeing as 1.3280 was meant to be a level as well then whether I survived or not would have been debatable. Looking at the move in Gold’ its failure to bounce much implies the same thing to me.

The market was long and now it is not and that’s why there’s little bounce, quite simply because there are no interim short positions to squeeze.

Ahead of the London opening the same thing appears to be happening in EURGBP, which had sustained its break out above 0.8370, all day yesterday.

Prior to that it had tried and failed many times to break above this level and the acceleration that I pointed out in yesterday morning’s update, only managed to make it to the 0.8395 region.

Well, its back underneath the break level now as I write (around 6.30am) and I have every confidence that it is in the process of hunting those longs established yesterday.

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The catalyst for yesterday’s move higher in EURGBP should have been the weaker than expected UK Q4 GDP, which surprised many by actually showing a lower number at -0.3% on the quarter from the previous -0.2% reading. However the fact is that EURGBP was on the move higher over an hour before that number was released!

The GBPUSD fell back on the GDP data only to rebound sharply as a result of some serious Middle Eastern buying, lifting the price from 1.5900 to 1.5952, before another push lower sent it all the way back to 1.5840 before the close in London. Naturally that last move was greatly helped by a higher USD and a weaker EUR.

The push higher in the dollar as the risk off trade returned helped gold trigger stop losses under $1670.

Earlier even as the EURUSD slipped back and equity markets turned sour the metal had tried repeatedly to rally from the lows and looked at one point as if it might defy the other drivers in the market.

However as the EURUSD fell through support at 1.3290 for the second time around 5pm, then gold capitulated, falling right through that break level at 1670, all the way down to 1655, remaining under $1660 even as US equity markets and the EURUSD recovered in to the US close.

Overnight the lower Asian equity markets have helped the JPY strengthen. It’s currently back near support at 82.60, which was briefly taken out overnight.

We are so close now to the Japanese financial year end (March 31) that it may be wise to avoid a short JPY trade for the time being.

I will just remind you of what I said in previous updates regarding the low point for the Japanese currency being reached around this time of the year in each of the past 4 trading years.

Well that may initially be the case this year and we know that several well known institutions are looking for a correction lower to under 80 from here versus the USD.

For whatever its worth, I think there is a chance of a correction and the move to 81.98 last Friday looked like it might yield a bit more to perhaps 81 or even 80.

However I think that after 4 years of the same, this year will be different and I don’t actually see the March/April low for the Japanese currency as being its lowest point on the year unless equity markets collapse into the summer.

That may happen of course but unless it does then I think that the Japanese currency has ended its cyclical up move and will weaken from here over the next 3-5 years.

The one caviat I would add to that rather bold statement is, if at any time the price trades back under 76 in USD terms then that would be a real game changer.

The only other note of caution on this would be US interest rates. The prospect of higher US interest rates has been one part of the equation in weakening the Japanese currency- not all of it by any means, but part of it, and if little bearded Benny gets his way, then this may just undermine that driver.

In the past you may have read what I had to say regarding the importance of a strong dollar in determining the price of crude and the importance of that in terms of its role in a world recovery.

Now of course a higher US currency is not the only driver on the price of oil, not by a long shot, but it is important.

There are other significant drivers such as Middle East tensions and overall global supply and demand. Well, the current concerns regarding a Chinese slowdown are being counterbalanced by real concerns over the Middle East.

What hasn’t changed is the importance of a significant move lower in Oil and just how much that is needed to revive the global economy.

Yesterday, one reason why the EUR started to slip back was down to rising concerns regarding Spain and its potential need for a bailout. That prospect was highlighted by an analysts note from the US bank Citigroup yesterday.

Spanish ministers subsequently pooh poohed that report, but if the markets do start to look beyond Greece to the hacienda then we could be in for round 2 of the never ending story.

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I don’t have a view on this right now but we should be aware of the potential. When one looks at the bare numbers from Spain it isn’t hard to make a case for this scenario.

This morning the early move lower in European equities, replicating the poor Asian session as been reversed somewhat as the DAX regains some ground following the better than expected German March unemployment data.

That news has helped lift the EURUSD to around 1.3340 in early trade. There is likely to be some upside acceleration above 1.3350, but that level looks hard fought just yet.

There is a good deal of data out this morning from the UK, EU and US later on. We will have the release of US Q4 GDP data which was previously estimated at +3%. Clearly that number could impact the USD either way later on as could the release of the latest weekly jobs data due out at the same time.

The early risk off moves this morning saw the USDJPY fall back through support at 82.60 as I previously mentioned and that level is so far managing to cap any pullback as I conclude this update.

There is also talk that a large superannuation player is on the offer in GBPUSD above 1.5925. Some of that may be down to GBPJPY which looks decidedly heavy this morning.

The combination of GBP weakness and renewed JPY strength is making this cross the main avenue for JPY gains into the financial year end.

In conclusion the general tone looks sideways really so far this morning and the JPY looks like it may continue to gain unless there is a significant improvement in the risk dynamic and equity markets this morning.

The AUD is also underperforming versus the JPY and Europe as AUDJPY continues to try and push back towards major resistance around 1.2965-75.

The EURUSD is continuing to track sideways with a slight upward bias.

That is probably being held back by renewed concerns regarding Spain and Italy, with Spanish workers taking to the streets today and the markets awaiting outcomes form the next batch of European debt auctions that may well be the order of the day unless some better news breaks to help lift this through the higher levels that I have already identified to you, namely 1.3350 and then 1.3390 ahead of 1.34 and 1.3510.

Good morning. Yesterday was a game of two halves; the first seeing really encouraging USD strength after what had been a reasonable German IFO report.

The single currency had however failed to rally on the numbers and had fallen back sharply under 1.32 again and the US currency was seemingly back in the driving seat.

That all changed by 2pm. The EURUSD had risen ahead of the Fed chairman’s speech but was unlikely to lift much further if he had said something relatively upbeat about the US recovery.

Well unfortunately the depressing little man didn’t and his reminding us that we are all still in the middle of a depression/recession was not what the market wanted to hear and the dollar got pasted as a result.

Now it may just be that Bernanke wants a lower dollar, but in all honesty I don’t think that was even on his mind. I think he is so turned on by his love of the depression and his own studies of what happened in the US in the 1930′s that he is determined to apply that historic knowledge to managing the economy in the current era.

His assessment of the situation may be correct of course, but reminding everyone all the time of the dangers and the lack of sustainability in the current recovery is not in my opinion, anything like what we should be hearing from this man.

If we are ever to recover and invest and create and take risk (by that I mean business investment etc) again, then unless we have a more upbeat message and tone from those who would set policy, there will never be the confidence to inspire the levels of growth required to lower the high rates of unemployment seen all around the developed world.

The prospect of lower rates in the US for longer and the increased chances of a possible QE3 is what helped the equity markets move significantly higher yesterday.

I still don’t think QE3 is a prospect, but many are taking Bernanke’s comments as endorsing the prospect. He is just about the only voice from the Fed board that I have heard lately that would endorse such a possibility.

The fact is that equity markets were doing just fine without this latest move and the rally was already intact.

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It may be that the world just gets on with it anyway and pays little attention to what people like Bernanke have to say – let’s hope that is the case.

However in terms of currencies, yesterday may have been a critical day for the USD and it’s just possible that the short bearded bloke has killed off the rally.

The USD index is edging ever closer to trend line support at 78.80 which if broken could open a path to 78.10 and if that doesn’t hold then we could see a return to the 76.00 region. Naturally if those levels were to be seen we’d be talking EURUSD back around 1.4000.

The other mover yesterday, outside of the USD, was Gold which shot higher on the prospects of higher inflationary pressures born out of potentially lower interest rates that could be in place for longer than was thought.

Bernanke’s comments yesterday were a fillip for anyone still long on the metal. As usual the initial comments saw a sharp spike that was so rapid it was hard to grab much inside of 1675-1680.

The price is back inside the middle of the cloud now and the next big level looks to be the top of the cloud which is now around the 1717 area. There is base line resistance ahead of that at 1709. As I write the price is moving through the highs seen yesterday and testing the 1693 level.

The early move this morning sent the EURUSD back to test the 1.3323 break out level but that held and the price is moving higher again helped by risk on and higher equities energy and metals as European bourses all move higher so far this morning.

This morning then it’s the US currency that has been on the defensive again and that is favouring the EUR and the GBP over the AUD and commodity currencies primarily because they look to have the greatest proportion of USD longs still outstanding.

The erosion of USD longs looks like it has further to run now as I pointed out earlier and with the prospect of the EURUSD testing its highs near 1.35 well and truly on the table that should mean that its only a question of time before the GBPUSD has a look at 1.6000 barring any negative news that could derail that prospect.

Good morning. Well the market eventually threw in the towel on Friday after the early rampant moves in the EURUSD once again didn’t yield a break into new territory as the price fell back under 1.3250 and lower ahead of the US opening, stalling at 1.3220 before lifting once again into the US close where it ran into offers again at 1.3275 which perhaps accounted for the gridlock price action from there on into the close.

In Asia overnight the story was pretty similar as the price failed again at 1.3285 and drifted lower towards 1.3250 as that session drew to a close and London rubs the sleep out of its eyes this morning – more on this in a minute

The JPY has weakened overnight versus the US currency. USDJPY traded as low as 81.98 on Friday afternoon as position removal and stop losses seemed to be the order of the afternoon for that pairing as well.

That move took place against a fairly benign risk environment but US shares did open lower and that helped the move lower in the USDJPY and EURJPY.

However by the close the US benchmark recovered back into positive territory, ending the week at 13,080. That helped the USDJPY close back around 82.50.

The Japanese currency has weakened a little overnight as Asian markets probe the topside to around 82.75 ahead of the European opening this morning.

In general it has been quiet in all markets overnight. Gold has come lower after squeezing recently established short positions all Friday afternoon to near $1670; it has drifted back to around $1660 in light trade overnight.

Gold seems to be keeping one eye back on the Oil price again, as renewed pressure in the Middle East has helped that market lift back near $106.50 a barrel.

Clearly with pressure building on the US president to take a stronger line on Iran, his comments regarding not ruling out a military option to solve the problem, are maintaining upward pressure on Oil and understandably on the yellow metal as well.

This morning sees the release of the German March IFO business climate index. That is expected to come in largely unchanged from the previous month, at around 109.6 with the reading on current conditions being slightly lower at 117 from the previous 117.5 with the reading for future conditions improving slightly to 102.60 from the previous 102.3.

This update will already be in the pipeline to you by the time that release hits the street, so if there’s a significant move just after 9am in the Euro then this may account for that.

The big economic release for the UK this week is the final reading for Q4 2011 GDP on Wednesday at 9.30am. That is expected to show an unchanged reading of -0.2% on the quarter and 0.7% annualized growth.

The markets should react accordingly to any marked change from what is expected. The pound looks poised to move either way if these numbers seriously out or underperform.

The AUD bounced again on Friday afternoon and that move helped a push in early overnight trade back above 1.0490, but it has lost momentum once again ahead of the European opening and the price is drifting back under 1.0450 as AUDCAD fails to breach 1.0475 again on the topside.

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The CAD is back under parity to the USD and that is perhaps due to the higher oil price. On Friday the price rallied sharply to 1.0030 as the USD was sold elsewhere and the CAD lost ground across the board, most notably versus the JPY, EUR and GBP.

It has however recovered a good deal of those moves overnight and the price once again looks pivotal to me. I have to say that the recent data emerging on a number of fronts from the Canadian economy doesn’t exactly paint a picture of strength as far as I can see. Clearly the high Oil price is having a continued underpinning effect on the currency relative to the other commodity currencies.

The only US economic release of significance for me is the final reading of their Q4 2011 GDP which is expected to remain unchanged, coming in at 3%.

Well the way the dollar and the Euro are performing at the moment it would be easy to think that it was the US economy that has a growth problem wouldn’t it?

I mean just look at the numbers folks; the European economy is contracting and the US is growing at around 3%.

That is at its best levels for a long while now and with the potential for Europe to slip back into recession again this year as live as ever what is the market thinking? I cannot buy the single currency. I am sorry not on a long term macro basis.

European bond yields have contracted a little overnight but the renewed upside pressure is still there. The new Greek 10 year bonds are yielding over 19% if anyone has the inclination to get burned on that investment ever again?

The current yields should give anyone a good idea on the level enthusiasm for that! The greater concern I think is Spain and Italy.

Spain is yielding over 5.4% again and Italy above 5% in the 10 tears. We should keep a close eye on how these markets develop from here.

As the markets grind on this week there is definitely a drop in volumes and liquidity impacting the markets ahead of the UK and Japanese financial year ends and the ever looming proximity of Easter.

The Chicago data released late on Friday evening showed a marked decrease in net JPY shorts by some 40%. That data was certainly endorsed by the drop in the spot price to record its biggest USD drop on the year so far.

The 16% reduction in net EUR shorts also perhaps explains the move higher in the EURUSD by the end of the week and perhaps we need to see more of the same before the EURUSD will eventually get its just deserts.

Right now the pressure points look to lie either side of 1.3160-1.3300 and with the current price ahead of the IFO data around 1.3240 that leaves us bang in the middle of the range.