www.forexnews.com
At 2:45 France INSEE March industry survey (exp n/f, prev n/f) At 4:00:00 AM E-12 Feb M3 (3mma) (exp 7.8%, prev 8%) E-12 Feb M3 y/y (exp 7.6%, prev 7.9%)
The dollar was little changed in desperately thin Asian trade as many dealers sat on the sidelines ahead of the fiscal year end in Japan. The lack of market moving data from the Eurozone will also keep the dollar in a tight range ahead of tomorrow's Easter holidays. The euro however continues to edge lower across the board, hitting a fresh 2-week low of 87.18 cents, 3-week low of 61.18 pence and 10-day low of 115.38 yen. Demand for the single currency dried up this week after last week's rally ran out of steam. Dealers are now waiting for a break of key support in the 88.10/00 range to confirm the next leg lower.
The Nikkei squeaked higher on Thursday after a 1% rise on Wednesday, but overnight gains were wiped away in the technology sector as profit-taking weighed on the market. Tokyo shares ended up 9 points, or 0.08% at 11333, maintaining above the 11,000 mark which many contend the government was targeting this month. Dealers expect the Nikkei to come under renewed pressure next month as the new fiscal year begins and temporary measures to support stock prices fade.
A government crackdown on short-selling combined with the prospect of higher US demand driving an export-led recovery in the second half of this year, helped Japanese companies balance sheets and has eased fears of a financial crisis next month, when banks will register their holdings at market value. But starting in April, traders should anticipate a revisiting of familiar topics in Japan, including: deflation, bad loans and reform. Therefore, the yen's recent strength should prove short-lived if policymakers continue to muddle and fail to come up with a viable solution.
Monday will also bring about a reduction in bank deposit insurance for Japanese savers as well as the Bank of Japan's Tankan survey on business, which is expected to show the first improvement in business confidence in 18 months, although still in negative territory.
The dollar rose from overnight one-week lows of 132.18 yen but remained pinned under stiff resistance at this week's high around 133.45. USD/JPY is expected to remain in a range of 131.80 to 133.45 going into this shortened weekend. But traders anticipate the dollar to move onto a higher trading range against the yen of Y135-Y140 following the March 31 fiscal year end.
EUR/USD held above support in the 88.10/20 range after comments from Philadelphia Fed President Santomero that the dollar's rise over the past year is indicative of an economic recovery. Overnight the pair slipped below 87.50 support to reach a 2-week low of 87.18. But only a break below key support at 87.10 would turn sentiment bearish again for the single currency after failing last week to break above its 200-day moving average at 88.62. Support is seen at 87.10 and 86.80, 86.30 and key support at 86.10. Resistance is seen at 87.70 and 88.20 and 88.40.
Santomero assuaged fears over the strong dollar policy after his colleague, Fed governor McDonough, said that the dollar is "theoretically" a little overvalued, on Tuesday. The dollar also found comfort from Treasury Secretary O'Neill's reiteration of the strong dollar policy.
In contrast to the strong dollar policy was the Swiss National Bank who put action to words yesterday by announcing that it would try to offset the recent rise in the franc by lowering its repo rate to 1.39% from 1.49% in its target LIBOR range of 1.25-2.25%. The move sent the franc lower across the board, with its biggest losses coming against the dollar.
Interestingly, the SNB's attempt to talk down their currency was met with a lukewarm reaction, because demand for the franc remains high due to the franc's tendency to rally on emerging systemic risk like the September 11 attacks and the ensuing fears of war in Afghanistan and now Iraq.
Even though SNB President Roth has remarked in the past that a EUR/CHF level around 1.53 is more desirable, EUR/CHF struggled to maintain above 1.4660 which marks the 38.2% retracement of he 1.4790 to 1.4775 decline. The upward momentum in USD/CHF also faded and gains are seen capped at trendline resistance at 1.6790. That should provide resistance while the dollar struggles to maintain above 1.6745. Only a sustained break above this level would encourage a more bullish stance, technical analysts remark. It marks the 61.8% retracement of the 1.6907-1.6477 decline.
Meanwhile, sterling held onto overnight gains against the euro but encountered pressure around 61.20 pence against the euro. GBP/USD also edged off of an overnight high of 1.4273 as sterling again failed to break above resistance at 1.4280. Prolonged rangebound in the 1.4220/80 range has put many traders on the sidelines, but dealers maintain that sterling looks heavy after failing to break key trendline resistance at 1.4320 last Thursday and the downside is now seen targeted. Support holds at 1.4220, 1.4205, and 1.4175. A break of 1.4175, which marks the 61.8% retracement of the 1.4085 to 1.4323 move, would call upon support at 1.4085. Resistance is seen at 1.4285 and the upside should remain contained by trendline resistance at 1.4310 followed by a reaction high of 1.4323.