Forex Trading

The Euro gained while the British Pound slipped lower against the US Dollar in overnight trading as the greenback tested the boundaries of its 9-month up trend while global equity markets hoped to break the downward trajectory that has characterized prices since October 2008.

Key Overnight Developments

• Japanese Economic Data Points to Deepening Recession
• US Fed Delays Stress Test Findings as Banks Debate Results
• Euro, British Pound Diverge Against the US Dollar

Critical Levels



The Euro trended higher in overnight trading, with EURUSD adding as much as 0.4%. The British Pound diverged from its continental counterpart, slipping as much as -0.2% against the greenback. The US Dollar has suffered some notable setbacks in recent days but technical positioning suggests the dominant bias continues to favor weakness in risky assets and a stronger greenback.

Asia Session Highlights



Signs of deepening Japanese recession were on full display in Asian trading with the economic calendar soaked in red ink yet again. The Jobless Rate jumped higher than economists expected to print at 4.8% in March, the highest since August 2004, while the ratio of available jobs to seeking applicants dropped to the lowest in 7 years. The pattern is a familiar one: dwindling overseas sales have pushed firms to scale back capacity, boosting unemployment and weighing on disposable incomes, with Labor Cash Earnings falling -3.7% in the year to March, the fastest in since July 2002. Reasonably enough, this has eroded consumer spending and pushed the world’s second-largest economy into the deepest downturn since the Second World War. Indeed, Japan’s government forecast that the economy will shrink -3.3% this year. Stagnating output has also pushed price growth deeper into negative territory with the Consumer Price Index revealing that inflation fell at an annual pace of -0.3% in the year to March.

The Federal Reserve said that it will postpone the release of stress test results for the biggest US banks as the firms’ executives debate the findings with regulators. The release was originally slated by for May 4th, but concerns arose that undercapitalized institutions would see their stock prices collapse after their names were revealed to the markets. However, the added uncertainty may prove to be enough in and of itself to spook investors out of risky assets in the days head.

Euro Session: What to Expect



Tentative signs of stabilization in the UK housing market are set to continue to trickle in during European trading hours. Mortgage Approvals are set to rise for the fourth consecutive month in March while Net Consumer Credit is set to turn back into positive territory after dropping to a record low in February. Still, it seems premature to conclude that the data is indicative of a robust, sustainable rebound that would bring economic growth to healthy pace in the near future. Indeed, past experience suggests that a bottoming in the pace of economic decline seems to lag behind a pickup in buying interest by at least 6 months. NIESR, a think tank, said the economy could “continue to decline for up to another year.”

Written by Ilya Spivak, Currency Analyst
Article Source - Euro, British Pound Diverge Against US Dollar as Prices Test Key Levels (Euro Open)