Investors’ Focus Shift to Central Banks

EUR/USD fell for the week and printed a bearish candle as implementation risks in terms of all the measures committed by European policymakers to deal with the eurozone crisis weighed on the euro. This week Spain will remain in focus with Moody’s Investors Service expected to finish a credit rating review soon that may cost Spain its sovereign investment grade status. Analysts expect the eurozone financial crisis to remain as a market factor for some more time. Although EUR/USD fell for the week, the pair managed to hold above the 200-day moving average which has been encouraging the bulls. The pair’s decline may be limited as the U.S. Federal Reserve’s announcement of a third round of quantitative easing will continue to weigh on the greenback.
The week ahead sees the usual first week of the month release of PMI data from key economies around the world. PMI reports are the most current snapshots we get on most economies. The first week of the month is also central bank week. The Reserve Bank of Australia meets on Tuesday. The Bank of England and European Central Bank will announce their latest policy decisions on Thursday. Then the Bank of Japan meets on Friday.
Speculative traders on the Chicago Mercantile Exchange increased their open short USD position by 72% from a week earlier to reach a net of $19.6 billion. CFTC’s data also showed that traders also cut their short EUR position by 32% from a week earlier to reach a net of $8 billion. Speculative traders increased their open long AUD position by 29% from a week earlier to reach a net of $9.3 billion. They also increased their open long JPY position by 38% to reach a net of $3.4 billion, the data showed.
The Asian stock markets opened lower today on mounting concerns over Spain’s economic crisis and as data signaled further evidence of slowing growth in China.. NIKKEI started the day at 8,815.07, previous close was 8,870.16. Manager of investment and research at SMBC Friend Securities, Fumiyuki Nakanishi said “Sentiment in Japan was more pessimistic than expected and could yet worsen, China’s PMI wasn’t great, we’ve got the United States’ ISM tonight; it’s a perfect environment to sell”.
EUR/USD is trading at 1.2874 by the time of typing and for today resistances are located at 1.2958 and 1.3000. Support levels are 1.2825 and 1.2775.
GBP/USD is at 1.6145. Resistance levels are located at 1.6179 and 1.6231. Supports are located at 1.6103 and 1.6054.
USD/CHF is trading at 0.9393 by the time of typing and for today resistances are located at 0.9445 and 0.9465. Support levels are 0.9371 and 0.9340.
AUD/USD is trading at 1.0366. Resistances are located at 1.0400 and 1.0452. Support levels are 1.0318 and 1.0270.
The economic calendar is heavy today. UK Manufacturing PMI and Net Lending figures will be released at 09:30 GMT. EZ Unemployment data will be released at 10:00 GMT. Statistics Canada will release RMPI data at 13:30 GMT. US ISM Manufacturing PMI is due at 15:00 GMT. Fed Chairman Bernanke’s speech starts at 17:30 GMT.