Hirose News|April 9, 2012 10:47 AM

FX Weekly Update

The yen was sold as always after a break above a strong resistance level at about 77.25 on January 24. The market then formed a double top at 84's on March 21, making the rise of the greenback didn't last long. The dollar then fell below the support line at 83's after fluctuating between 82.5's and 83.5's.

Because of
a low expectation for QE3 (Third round of quantitative monetary easing) and outer performance of U.S. employment data, the buying positions for the greenback increased. However, the 120,000 increase in NFP is much lower than the expectation (+203,000), dragging the dollar down to 81.31 versus the yen.

Generally the market is likely to be confined between 80.00 and 85.00, but if the underperformance of U.S. employment data increases the possibility of QE3, the dollar may fall to the lowest versus the yen again. Keep your focus on the change of support line at about 81 and from 81 to 80.5, and find the entry level of buying.

Expecting range 80.50-83.00  Though the possibility of approaching the lowest is increasing, buy the dollar on dips at the moment.


Though the euro formed a head and shoulder with a head at 1.3485 and should fall to
1.265's after breaking below 1.3000 against the greenback, it unexpectedly rose ahead of 1.3385. At the moment, speculators buying the euro have increased. Nevertheless, people buying the greenback and selling the euro is increasing, since the possibility of implementation for QE3 reduced. Furthermore, because the yen slid versus its peers, other currencies are being sold even more significantly (the dollar is being bought), making the euro is sliding to 1.305's against the dollar.

From the chart we can see that if a break below 1.30 happens, the euro may even slide to 1.27 versus the greenback, so buying the euro is very dangerous. Even though the euro rebind to 1.31's against the greenback because of the underperformance of U.S. employment data, the market is still heavy and the technical fall on EUR/JPY will negatively affect EUR/USD as well. What's more, there are lots of buying position of the euro because Swiss central bank have to protect the ceiling of 1.2000 per euro, there is great amount of stop orders from 1.1980-70(the amount is too huge that even interbank may not able to deal with). As a result, the possibility of downside is increasing, and the euro will slump suddenly should the ceiling of 1.2000 is broke. Buying the euro is not a good idea.

Expecting range  1.2920-1.3250  Sell the euro on rally, and take your profit as ASAP. Keep paying attention to the intervention of Swiss central bank on EUR/CHF.

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