U.S. Update: market after ECB and G20

The two huge fundamental events scheduled for today have not disappointed market participants. High volatility all across the board, send Gbp and Euro to test or even break key mayor resistances levels.

Through G20, world leaders summit a plan to increase international aid by $1.1 trillion to cushion the deepest global recession world is suffering since World War II and agreed to tighten oversight of the financial industry. They will channel $750 billion to the International Monetary Fund, $100 billion to the World Bank and provide another $250 billion in trade finance, the draft said. All hedge funds will have to register with national regulators.

ECB surprise market with a cut of just 0.25% points instead of the 0.50% economist were expecting, and it’s President, Jean Claude Trichet, said policy makers are ready to lower their benchmark interest rate further, while the deposit rate has probably reached its floor. “I don’t exclude that we could in a very measured way go down from the present level” of 1.25 percent, he add. The deposit rate is at “an extremely low level at 0.25 percent, and I don’t expect that we’ll move in the period to come.” Important notice, Trichet did not made any comments about unconventional monetary policy, giving Euro further support.

Positive sentiments together with bolder trader are growing at a very fast pace after this, and also Wall Street is cheering: Dow Jones Industrial Average has just reached the key 8000 level, mayor resistance zone. Clear continuation above, will bring more optimism around the world.

Gbp/Usd overview

Upside momentum in the pair continues after just reaching the 1.4740 zone that temporally halt the continuation. Strong resistance lays around 1.4770/80 a tough congestion zone. If this last is cleared, after due corrections longer term perspective in the pair turns clearly bullish, and targeting next mayor resistance zone around 1.5000. 1.4637 could well be a target for corrections. As long as the price remains above that level, upside bias remains intact. 4 hours charts are getting into over bought territory right now. Next candle opening will probably clear if we will see more continuations or corrections for the next hours.

U.S. Update: Non Farm Payrolls

U.S, job losses continued to mount in March and unemployment hit a 25-year high, as employers trimmed 663,000 jobs from their payrolls past March, while as expected, unemployment rate rose to 8.5% This reading represents an accumulated of 5.1 million jobs lost since the beginning of 2008, being 2 million just for the first three months of this year. Also, service industries in the U.S. unexpectedly contracted in March at a faster pace as unemployment climbed and consumer confidence held near a record low. The ISM index of non- manufacturing businesses, which make up almost 90 percent of the economy, fell to 40.8, the lowest level of the year, from 41.6 the prior month.

Dollar remains steady against most majors despite the readings, as U.S. reports are affecting more market sentiments that dollar itself. Risk aversion/ risk appetite is the number one market mover these days, and such a bad reading tends to dismiss investors optimism. Wall Street failed to stay above the 8000 points level after yesterday’s spike above, and at this moment, remains in the red side.

Gbp continues being the strongest currency across the board, helped by the PMI Service index that rose more than expected from 43.2 to 45.5 in March comparing to expectation of 43.5. U.K. Halifax house price dropped -1.9% in March, slightly deeper than expected around -1.8%.

Usd/Jpy overview

Bullish trend in the pair has almost reached the strong descendant trend line coming from the 110.66 highs form past August 15th. Descendant line is around 100.40and will be the key break up point: once the line break is confirmed in daily time frames, long term bias will become clearly bullish, thus, the 100.00 zone seems to be a mayor selling zone still. Come back under 98.20 could send correction deeper, close to the 97.00 zone and delay the continuation, yet does not seem likely at this point. Long term EMA’s are supporting the bullish perspective both in daily and 4 hours charts, despite indicators are a bit exhausted. As mentioned, downside corrections should be short lived, and limited.

U.S. Update: Corrections in Europe

Market open Asian session hooked on a positive sentiment, sending dollar and yen down across the board. Asian stocks close quite positive, but Europe change things and market is now in correction mode.

With stocks turning to the red side, European producer prices fell more than expected highlighting the increasing risk of deflation in the region. Factory-gate prices in the euro region fell 1.8 percent from the year-earlier month, the most since April 1999, while retail sales fell 0.6% in February, for a 4% decline from the same month last year. Market was expecting a 0.4% monthly fall and a 2.5% YoY decline. Inflation pressures continued to ease at the wholesale level, with February producer prices falling 0.5% from January and 1.8% compared to February 2008.

Previous week rumors of an intervention in the forex market, has found bases today after Lorenzo Bini Smaghi, ECB Executive Board member said the bank can intervene in the currency market if needed. He said: “Exchange-rate markets are prone to episodes of overshooting and undershooting,” “Public intervention -- in the form of public statements or even outright interventions in FX markets - - may thus be warranted.” These words, are putting extra pressure in the hegemonic currency, that break under 1.3400 level at the beginning of American session.

Wall Street stocks and future slipped at the opening, with DJIA still unable to break above the 8000 and almost 100 points down with technology shares leading the retreat after a breakdown in IBM and Sun Microsystems talks. Sentiment has turn and is favoring greenback that continues pushing higher across the board, followed by Japanese yen that anyway remains weak at the moment, and holds above the 100.50 level against Usd.

Eur/Usd overview

Euro has turned bearish both in 4 hours and daily charts, and find support at the 60 EMA in the first one. With indicators pointing for further downside continuation, if price manages to move under today’s low, consider supports at 1.3311 and 1.3260 zone, probable minimum target for today. Being oversold in small time frames, the probably could return to the 1.3420 zone, and above 1.3470 if the mentioned 60 EMA holds the downside. Longer term perspective remains range bound between 1.3100/1.3700 levels. Either way, pair needs to confirm at least with a daily candle opening under or above the mentioned congestion zones to define a more certain direction for the rest of the month.