Rising global recession concerns affect euro

04-15-2009 14:37

The Goldman Sachs reports exceeded expectations and boosted optimism, which was frustrated by the rising global recession concerns and pressured the euro. During the European trading sessions the EUR/ USD dropped to 1.3266 after it found resistance at the 20-day SMA at 1.3392. The French present account proved that the deficit contracted to 2.2 billion. Last Friday Nout Wellink said that the central bank may reduce its benchmark rate further. The single currency could suffer downside risks considering the outlook of an increase in non-standard actions and the prospects of additional easing. The 100-Day SMA at 1.3188 will be an important level to monitor and a break under support may make the pair vulnerable to a 1.3000 fall; the 50-Day SMA.

Increasing banking optimism boosts GBP/ USD

During last night’s trading GBP/ USD fell to 1.4827 while the sterling found support in spite of rising global growth concerns. Optimism over the banking sector boosted the pair and sent it to as high as 1.4922. However, price action remains choppy as a result of the more gloomy global growth forecast. The 1.5000 price level could turn out as a difficult resistance while downside risk could be the result if it continues. Still, the 1/8 high of 1.5375 may be the next obstacle in case of a break above.

Annualized Japanese GDP dropped 19.7%

During overnight trading the Japanese yen found support as a result of the more gloomy prospects for the global economy, due to the record contraction (since 1969) of the Singapore economy. The annualized, seasonally adjusted real gross domestic product dropped by 19.7% versus last quarter which surpassed the expected 7.5%. Despite the fact that the yen found support, should the earnings season continues to exceed the expectations and if the US economy indicates an improvement, weakness could pick up as the currency could regain its funding status. However, 200-Day SMA at 98.99 continues to be the most import level to focus on and a break below this level could make the pair vulnerable to a considerable fall. Still, the 20-Day SMA seems to fall below the longer term technical gauge and this may be an indication of continued bullish momentum.

US recovery: bearish or bullish for dollar?

The greenback caused mixed sentiment as traders intent to figure out if the positive earnings from Goldman Sachs can be attributed to its skills or to broader economy. However, there is no consensus on whether a US recovery is bearish or bullish for the dollar on the short-term. Some traders believe that increasing optimism will convert safe-haven flows and affect the greenback. There are also market participants who believe that an improving economy will be positive and that outgoing flows will be frustrated by demand for risky assets. Consumption is projected to rise by 0.3% in March and today’s US retail sales report could provide clarity. This could boost risk appetite and would mean only the second positive print. Still, there are market participants who fear that the US economy will not be able to handle the increasing job losses, which has been proved by the falling stock markets during overnight trading. The positive outlook is a result of the tax returns in combination with their savings rate already above 4% has boosted consumption.