Market Review for March 12

Tuesday was more interesting, at least, range extended in response to the emergence of new economic developments. However, the European currencies were closed near the opening level. As a result, EUR/USD completed a day of 1.3010, and the GBP/USD — at 1.49.

Dynamics of EUR/USD was quite interesting against practically empty economic calendar. Pair received impetus during the European session due to the dynamics of EUR/GBP, and strengthened by the daily minimum to maximum 1.2990 1.3074. However, strong resistance area did not allow steam to keep the position and closed again we have seen trade in 1.30.

GBP/USD predictably fell to new lows at the output of the weak data on industrial production. Volumes have fallen by 1.5% against the expected growth of 0.1%, showing the sharpest drop since September last year. All this only increases the chance of a negative GDP in Q1. As a result, the level of the opening pair down to 1.4912 minimum 1.4830, but by the end of trading still rolled back.

USD/JPY this morning filed a good hope, noting daily high at 96.70, due to talk about the fact that the new head of the Bank of Japan may convene a special meeting in March. It is assumed that it will decide on further expansion of the quantitative easing program. But by the end of the day, it became clear that this is just a rumor, and besides, there are questions about the approval of the Central Bank Deputy Iwata. As a result, the pair slipped to a minimum 95.63, but ended the day near the 96.00 resistance.

Forecast for Wednesday, March 13, 2013

EUR/USD continues to hold within a narrow range, expecting a strong enough catalyst to break down either 1.2960 or 1.3060 for a breakup. About factors more ambitious nature (narrowing of the balance of the ECB and the switch to «out of savings»), we have said, all of it continues to keep the single currency afloat. Today, however, pay attention to the news from the U.S. in the form of retail sales data, which can turn the tide.

The current release is particularly important also because it will be the first full measure of public reaction to a tax increase on January 1, this year. These are difficult to predict because of two countervailing factors: reduction of income and an increase in the working population. According to forecasts, the main figure will rise to more impressive 0.5% after little weak growth by 0.1% in the previous period. But there is reason to believe that the actual levels will be slightly higher (around 0.8%), as indicated by informal studies retail chains. Thus, we repeat the next target for the pair at levels 1.2960, 1.2920, and 1.2880.

As for the GBP/USD, there is food for thought. As we said, the British currency heavily oversold, so short-term correction is not excluded — which is why the level of 1.4870 restrained even terrifying data on industrial production. In the absence of releases scheduled for today in Britain, waiting for catalysts from the U.S.. According to our scenario, GBP/USD still be able to go below 1.4870 on strong retail sales outlet with the immediate goal at 1.48.

Despite the turmoil in the form of short-term doubts about Iwata as deputy Kuroda, USD/JPY is still focused on the north, and we expect to continue this trend. U.S. release could push up the pair targeting 96.60 and then to 97.20.


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