Morning Forex Review – April 7th

Coming Up Today (All Times GMT)

• JPY – BoJ Monetary Policy Statement (Tentative)
• GBP – MPC Rate Statement (11:00)
• EUR – ECB Rate Announcement (11:45) & Press Conference (12:30)
• CAD – Building Permits (12:30)
• USD – Weekly Jobless Claims (12:30)
• GAS – Weekly Storage Report (14:30)

USDJPY

Expectations of widening interest rate differentials between improving economies and Japan are reviving yen-funded carry trades. In the aftermath of the tsunami, investors are taking advantage of the BoJ zero interest policy to sell yen against higher-yielding currencies (AUD, NZD, CAD, EUR, CHF). In this context, all JPY crosses are moving in a bullish channel, a trend that is likely to continue if the Bank of Japan increases its lending facilities to avoid downward pressure on the economy.

USDJPY Support/Resistance: 84.70/85.90

EURJPY Support/Resistance: 121.50/123.00

GBPJPY Support/Resistance: 138.25/140.00

EURUSD

Yesterday, the EURUSD pair was almost unmoved by Portugal’s request to access the emergency lending program of the European bail-out fund. Currently, all eyes are waiting for today’s ECB rate announcement (11:00 GMT) with one question on everyone’s mind: will the ECB interest rate hike be followed by many other? If Chairman Jean-Claude Trichet indicates that the ECB is considering a gradual normalization of its policy, the euro could extend its gains, with $1.4400 and £0.8820 as next targets. Conversely, if the market sees evidence of a more dovish stance, the economic troubles of Portugal and their implications for Spain could re-surface and trigger profit-taking towards $1.4200 and £0.8700 support levels.

EURUSD Support/Resistance: 1.4200/1.4400

EURGBP Support/Resistance: 0.8750/0.8820

GBPUSD

Yesterday, the NIESR research institute projected first quarter‘s GDP growth at 0.70% in the UK. This encouraging data helped counterbalance the negative announcement of a slowdown in UK production between January and February. Altogether, the UK economy is still sending mixed signals – a situation that is likely to convince BoE members to leave interest rate unchanged, until more signs of recovery materialize. Technical wise, the GBPUSD pair is supported by the $1.6260 and $1.6220 support levels.

GBPUSD Support/Resistance: 1.6220 – 1.6260 / 1.6350