Forex Trading

The US Dollar may see selling pressure in European hours as stock exchanges open for the first time since last week and investors price in Japan’s third stimulus package as well as news that first-quarter earnings at banking giant Goldman Sachs more than doubled expectations.

Key Overnight Developments

• New Zealand Retail Sales Unexpectedly Rise in February
• Australian Business Confidence Improved in March, Says NAB
• BOJ’s Shirakawa Skeptical About Signs Economy is Rebounding
• Euro Corrects Lower, British Pound Range-Bound Against USD

Critical Levels



The Euro corrected downward in overnight trading after an impressive rally in New York hours, testing as low as 1.3306 to the US Dollar. The British Pound traded sideways in a choppy, 40-pip range above 1.4830.

Asia Session Highlights



New Zealand Retail Sales unexpectedly rose in February, adding 0.2% from the previous month. The improvement may mean that consumers are starting to respond as the central bank brought borrowing costs to a record-low 3.00% while the government cut income taxes on those earning over NZ$42k per year. Ample room for skepticism remains, however, as rising unemployment weighs on disposable incomes and discourages spending. Further, a rebound in oil prices may also explain the uptick: fuel sales led gainers in February, rising 6.7%; meanwhile, crude rose for the first in seven months during the same period, rising 7.2%. New Zealand’s retail sales data is not adjusted for price changes, suggesting the improvement in the headline figure may be reflective of higher petrol costs rather than a rebound in consumer sentiment. Indeed, core retail sales (which exclude fuel sales) declined -0.1%.

In Australia, NAB Business Confidence rose for the second consecutive month to print at -13 in March from -22 in the previous period. NAB chief economist Alan Oster remained cautious, saying, “While an element of fear appears to be abating, the index is still quite low [and] points to falling demand in the first quarter.” The measure is based on a survey of around 350 small- to medium-sized firms, with a negative reading showing pessimists continue to outnumber optimists among respondents.

Bank of Japan Governor Maasaki Shirakawa said he was “cautious” about the initial signs that the current economic downturn was stabilizing in a speech to a parliamentary committee in Tokyo. The bank chief noted that, “While drops in exports and output are easing, we expect business investment and consumer spending to keep weakening and become major factors that will drag down growth.”

Euro Session: What to Expect




With no substantial, market-moving data on the economic calendar, price action is likely to fall in with risk trends in the forthcoming session. European stock exchanges have been closed since last week, opening the door for a move higher as traders price in announcements of Japan’s third stimulus package as well as news that first-quarter earnings at US investment banking giant Goldman Sachs more than doubled expectations. Stock market gains could weigh on the US Dollar: the greenback remains over -90% inversely correlated with the MSCI World Stock Index.

Written by Ilya Spivak, Currency Analyst
Article Source - US Dollar May Fall as Goldman Earnings, Japan Stimulus Boost European Stocks (Euro Open)