LiteForex - Analytics

    LiteForex

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    Weekly review on 21.03.2016

    Last week the USD fell against major currencies. Today, the USD started to rise. It is too early to say that downtrend in the USD has changed, as it is likely that upward correction is just of temporary nature.

    Last week the US Fed left interest rate unchanged at the level of 0.5%, and lowered forecast of future increases in the rate.

    It is planned that the key interest rate will be raised up to 0.875% in 2016. Earlier it was planned that the key interest rate would be increased up to 1.375% by the end of 2016 and 3.25% by the end of 2018. By the end of 2017 the rate will amount to 1.875%, by the end of 2018 - 3%. In the long-term the rate will reach 3.25% against the forecast of December of 3.5%.

    It is likely that the US Fed will postpone monetary tightening policy at the later time as it has led to the weakening in the USD. There are almost no fundamental data which can support the USD.

    On the other hand, other world central banks will probably have to adopt drastic interest rate decisions in their countries. Lately decline in the interest rate has become one of the main measures of the central banks, as they introduce easing monetary policy to support national economies.

    NZD/USD

    The battle for the cheaper national currency may gain momentum. The proof of it is the fact that RBNZ has lowered interest rate. Now, after the US Fed has left interest rate unchanged, the pair NZD/USD has regained its positions. It is possible that the key interest rate in New Zealand will be lowered to 1.75% from the current level of 2.25% and can happen at the meeting of RBNZ in June and August.

    On Wednesday 23 March At 23:45 (GMT 2) the data on foreign trade balance for February will become known. The decline in the index will give ground to another reduction in the interest rate.

    Prior of the publication of the foreign trade balance on Tuesday, the company Fonterra, the largest supplier of dairy product in New Zealand will release its 6 month report. Positive data of this report will support the NZD.

    USD/JPY

    The state of the Japanese currency and the pair USD/JPY will be indicated by the data on business activity index in all sectors for January (except financial industry). The index will be released on Tuesday at 06:30 (GMT 2). It is a leading indicator of productivity growth. It is expected that the index will grow ( 1.9% against the decline of -0.9% in the previous month). If this forecast proves to be correct, the pair USD/JPY will decline. On Friday, at 01:30 some more news will be released, including consumer price index (CPI) for February-March. This is the most important indicator showing changes in market sentiments. Inflation reduces purchasing power of JPY. High level of the index will be a favourable factor the Japanese Yen.

    From the point of view of technical analysis the pair USD/JPY is at the important support level of 111.30, which is crossed by 144 period of moving average line. If this line is broken down, the pair will go to 108.00 and to the key support level of 105.00. Current fundamental data makes this scenario feasible.

    GBP/USD


    The news, which will become known on Tuesday at 11:30 (GMT 2) will be important for the pair GBP/USD. The UK retail price index, consumer price index and producer price index for February will become known. In case the indices will be positive, the Pound will get support. It is expected that the indices will grow, which will have a positive impact on the pair GBP/USD. The pair is near strong support levels at the lows of the years 2002, 2006 and 2009. Monthly candlestick in March has grown up to the middle of the candlestick of January. On the weekly and monthly charts the technical indicators give signals of the continuation of upward correction in the pair GBP/USD. Last week, the Bank of England left interest rate unchanged. The Bank of England said that the rise in the interest rate is more likely than the decline. However, the Pound is still under pressure from the coming referendum on the UK’s membership in EU.

    The day will be uneventful today and the USD will regain some of the losses of the last week. However, after the US Fed comments and the US fed decision on interest rate last week, pressure on the USD can resume on Tuesday.


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