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Key options expiring today Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT). EUR/USD: $1.3025, $1.3070, $1.3100, $1.3210 (large); EUR/JPY: 106.25; USD/JPY: 81.00, 81.15, 81.25, 81.50; GBP/USD: $1.5960, $1.5990, $1.6000; EUR/GBP: 0.8175, 0.8200; AUD/USD: $1.0300, $1.0415, $1.0435, $1.0450; USD/CHF: 0.9150.

BMO: trading EUR/USD on Spain's woes Spain issues as much as 2.5 billion euros in 2- and 10-year government bonds on Thursday, trying to cut budget deficit. The country struggles to prove its ability to finance itself without begging for external financial support. On Wednesday Spanish 10-year yields were down 1.8 b.p. to 5.89%. However, the investors are getting nervous again ahead of the auction. According to analysts at BMO Capital, the EUR/USD is creating lower highs and lower lows. If the euro becomes weaker against the greenback after the auction, strategists recommend entering the trade right around $1.3130 with a stop at $1.3230 and targeting at $1.2850 or $1.2830.

Commerzbank: trading EUR/GBP Analysts at Commerzbank are bearish on EUR/GBP in the long term and recommend entering the trade at current levels with a stop at 0.8277 (April high) and targeting at 0.8067 (2010 low). On Wednesday the cross closed the day below 0.8221 (Jan. 9 low), reaching a new 20-month low. According to analysts, the market is viewed as having recently broken down from a 3 month consolidation.

Wells Fargo: bearish outlook on EUR/USD According to analysts at Wells Fargo, the euro will reach 1.24 against the dollar by early 2013, and continue keep falling to 1.22 from there. In their view, the debt problems are flourishing and economic activity in the region remains weak. Analysts expect the ECB to cut rates to stimulate the economy. Moreover, Wells Fargo analysts note that the technical forecast on EUR/USD also remains bearish (20-day MA lies below the 50-day MA).

Yen down on BOJ comments The yen weakened today against most of its peers on the back of the Bank of Japan’s officials “dovish” comments and the unexpectedly wide trade deficit. On Wednesday the BOJ Governor Masaaki Shirakawa said in the central bank is “committed” to adding monetary stimulus. Deputy Governor Kiyohiko Nishimura confirmed that the bank is ready to implement additional easing if necessary. The next BOJ meeting will be held on April, 27. Japan posted a trade deficit of 82.6 billion yen in March from a revised surplus of 29.4 billion yen in the previous month and forecasted 223.2 billion yen deficit. Mitsubishi UFJ: Markets are pricing in additional easing by the BOJ. A trade deficit is a negative catalyst for the yen. The USD/JPY is strengthening for the third consecutive day and climbed to 81.51 yen, after reaching 81.57 yesterday, the highest level since April 10. The EUR/JPY rose to 106.92 yen today.

USD/CHF: technical comments The currency pair USD/CHF is moving sideways since the beginning of January, creating a triangle. The cross is clamped between the 50- and 100-day MAs. Moreover, on a daily Ichimoku chart Kijun-sen and Tenkan-sen are lying horizontally in the Cloud, also pointing at a flat market. The trend may be breached both on the upside and on the downside. Breakthrough the levels 0.9330 and 0.8930 will confirm the reversal. The pair USD/CHF climbed to 0.9197 today, finding the nearest resistance at 0.9229 (100-day MA), 0.9251 (high Apr.16) and 0.9254 (high Mar.16). Support lies at 0.9120 (21-day MA), 0.9092 (low Apr.13) and 0.9050 (hourly high Apr.3). As for the news, Thomas Jordan was named as permanent president of the Swiss Central Bank today. He became interim SNB chairman on Jan. 9 when his predecessor Philipp Hildebrand resigned after a trading scandal involving his wife. Swiss ZEW economic expectations index released today indicates optimism (2.1 in March vs. 0.0 in Feb.).

Commerzbank: USD/CAD technical The pair USD/CAD is trading almost unchanged from today’s opening price. Analysts at Commerzbank think that “Tuesday’s sharp drop to 0.9864 looks to be impulsive, however, thus increasing the odds of support at 0.9841 (March 1 minimum) giving way within the weeks ahead, provided, of course that 1.0052 (April 11 maximum) continues to cap”. The specialists claim that if USD/CAD closes below 0.9842, it will slide to 0.9786 and then 0.9726. If the pair closes the day above 1.0052, it will be able to start rising to 2011-12 resistance line at 1.0161.

EUR/CHF: Will the SNB rise the 1.20 floor? Swiss ZEW economic expectations index released today indicates optimism (2.1 in March vs. 0.0 in Feb.). Due to this month’s unexpected improvement some analysts expect franc to strengthen. Moreover, franc may remain “safe haven” from Europe’s debt woes which have resurfaced: demand for Swiss assets remains high even despite the negative 6-month bill yield. HSBC thinks, for example, that all attempts of the SNB to weaken the Swiss franc won’t work. On the previous SNB meetings, Swiss policymakers disappointed the market by not raising the EUR/CHF floor from the current boundary of 1.20, provoking a steep appreciation of the franc to this level. Analysts at UBS claim that if EUR/CHF does test 1.20 again, stronger intervention by the SNB would be welcomed by the investors who remain nervous of a broader decline through the figure. Market expects the floor to be lifted to 1.25 francs at least. EUR/CHF strengthened today to 1.2029 (above the Ichimoku cloud on the H4 chart). Watch the release of Swiss trade balance for March on April 24. Trade surplus increased from 1.5 billion francs in January to 2.68 billion francs in February.

Germany sells 2-years with record low yield Germany sold today 4.206 billion euro in 2-year bonds out of the 5.0 billion euro target. Average yield was at record low of 0.14% from previous 0.31%. Rabobank: “Investor demand for core paper remains firm with the background threat of crisis tensions ratcheting yet higher underpinning an overriding desire for capital preservation”. Investors were watching the sale with great attention after the unsuccessful launch of a new 10-year German bond last week. In secondary markets German yields remain very low as the nation’s debt is still perceived as a refuge.

Sterling’s supported by positive data So, MPC meeting minutes is releases. The vote to keep the benchmark rate unchanged at 0.5% was, as expected, unanimous. As for the Asset Purchase program, only David Miles called for its increase from 325 to 350 billion pounds, while Adam Posen who voted for more easing last month has changed his mind. Also note that British unemployment rate fell from 8.4% in January to 8.3% in February. The claimant count change (change in the number of people claiming unemployment-related benefits) dropped from 4.5 in February to 3.6K in March. The pair GBP/USD managed to climb to $1.5990 on the news and is now testing resistance in this area. Bulls will also face resistance at $1.6015 (upper Bollinger) and $1.6063 (April 2 maximum). Support lies at $1.5842 (200-day MA). Note that the 55-day MA approached the 200-day one and may cross it bottom-up – positive signal.

The IMF: Australia's in the forefront According to the International Monetary Fund (IMF), Australia’s economy is the strongest in the world and it is expected to stay the best-performing economy for at least the next two years. The IMF also forecasts the Australia's unemployment rate to remain low at 5.2% in both 2012 and 2013. Australia’s economy is expected to grow by 3% this year on the back of easing economic woes in Europe and the U.S. However, the economy may be hurt in case if tensions in the Middle-East lead to new commodity price hikes. "The IMF's confirmation of Australia's strong economic fundamentals - with solid growth and low unemployment - further underscores the importance of returning the budget to surplus, and giving the Reserve Bank maximum flexibility to cut interest rates if it considers that is necessary," the deputy prime minister of Australia Wayne Swan said.

RBS reduced forecasts for AUD/USD Analysts at RBS reduced forecasts for Australian dollar versus the greenback for Q2, Q3 and Q4 from $1.05 to $1.02, from $1.08 to $1.05 and from $1.10 to $1.08. The specialists explained the revision by the fact that strong Aussie has a negative impact on the nation’s economy causing political and economic uncertainty. Australia may face in the near future declining trade volumes, increasing budget deficit and the possibility of shrinking capital expenses.

GBP: watch MPC Meeting Minutes On Wednesday the Bank of England will publish the minutes of MPC meeting, held on April, 5, when the policymakers agreed to leave its QE program 325 billion pounds. The previous minutes released on March 21 showed two policymakers still think additional QE is required. The March consumer price index (CPI) rose in line with expectations by 3.5% after increasing 3.4% the previous month, reducing concerns on further QE. BNP Paribas: The surprisingly dovish minutes put the GBP in harm’s way. The April minutes may highlight a different tune. Societe Generale: As UK economic data have been a bit less worrying of late, the need for further QE may have lessened. Any low vote in favor of further QE would be GBP-positive versus AUD. Bank of America: The pound needs to climb above $1.5986 (the right shoulder of the so-called head-and-shoulders pattern) to invalidate further weakness. Analysts at BMO Capital believe that if today’s data come out more dovish, the sterling will weaken. In this case analysts recommend selling the cable with a stop at $1.6025 and a target of $1.5650. Today also watch out for important labor market data: the claimant count (forecast 6.6K in March vs. 7.2K in Feb.) and the unemployment rate (expected to remain at 8.4%).

Yen’s declining: reasons and technical comments Japanese yen eased down versus its main counterparts. The pair USD/JPY rose from Monday’s minimum at 80.28 to 81.40 today. Among the reasons of such move we may cite: - Risk appetite improved due to positive news seen yesterday: high earning from companies such as Coca-Cola, Spain's successful debt auction and unexpectedly strong German investor confidence; - The IMF raised yesterday 2012 and 2013 forecast of global economic growth from 3.3% and 4% to 3.5% and 4.1%. - S&P 500 gained 1.5% and MSCI Asia Pacific Index of shares added 1.2%, - US jobless claims may have declined from 380K to 370K (data released tomorrow at 12:30 GMT); - Nikkei newspaper: the Bank of Japan may increase its 2012 core inflation forecasts from 0.1% to 0-0.5%. The BOJ is expected to announce additional monetary on April 27, while the Fed may refrain from the hints on more easing. - Japan’s trade balance (released on Thursday) may have switched to deficit in March after a small surplus in February. RBS thinks that there will be “some strength in a range of currencies against the yen.” Union Bank NA warns, however, that “if nothing is announced, USD/JPY is more likely to drop below 80.” Wells Fargo claims that the technical outlook for the pair is bullish (20-day MA above 50-day MA). Resistance is found at 83.30 yen (April maximum) and 84.18 yen (March maximum).

USD/CAD plummets after BoC statement The USD/CAD reached a 2-week low after the Bank of Canada announced the overnight rate remains at 1.0%, but said in its statement that easy monetary policy may be coming to an end. The central bank expects the Canada’s economy to grow by 2.4% in both 2012 and 2013. "In light of the reduced slack in the economy and firmer underlying inflation, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate," the BoC said. USD/CAD plummeted to C$0.9889, with the support at C$0.9867 (low Mar.20) and C$0.9859 (low Mar.19). The resistance lies at C$0.9958 (prior intraday support), C$1.0031 (high Apr.16) and C$1.0051 (high Apr.11).

Barclays Capital: bullish view on AUD/USD Analysts at Barclays Capital expect Australian dollar to strengthen versus its New Zealand’s counterpart. The specialists draw investors’ attention to relative commodity price performance in recent weeks and the fact that Australia will benefit more from growth in the US and China. In addition, BarCap thinks that the market is already pricing in a 90% probability of a 25-bp RBA rate cut on 1 May and an aggressive 80bp of cuts by year-end. From the technical point of view, Aussie’s advance above $1.2670 will make the pair AUD/NZD rise to $1.2725 and $1.2765/70 on the short squeeze.

Westpac: trading AUD/JPY Analysts at Westpac Institutional Bank believe that Chinese authorities wouldn’t have widened yuan’s trading range unless they expected national economy to recover in the second half of the year. The specialists say that in the longer Australian dollar will benefit from better economic situation in China as the 2 economies have close trading connections. In the near term, however, Aussie’s rate will depend more on the RBA’s monetary policy. Westpac expects Australian central bank to cut borrowing costs in May, so AUD will get under negative pressure. According to the analysts, one should sell AUD/JPY around 83.50 targeting 81.20 (200-day MA) and stopping at 84.60 as Japanese yen will enjoy safe haven demand as a refuge from European woes.

Pound up on CPI data The cable strengthened to $1.5953 level on Tuesday after the benign inflation figures were released. The March consumer price index (CPI) rose in line with expectations by 3.5% after increasing 3.4% the previous month, reducing concerns on further QE. Technical analysts at Commerzbank remain bearish on the GBP/USD prospects. In their view, the pair won’t break through the strong resistance at $1.6000. Resistance lies at $1.5985 (high Apr.12), $16000, $1.6063 (high Apr.2) and $1.6095 (high Nov.14), while support – at $1.5843 (200-day MA), $1.5836 (55-day MA), $1.5808 (low Apr.10) and $1.5801 (low Mar.26). This week watch out for important data on claimant count, Monetary Policy Committee meeting minutes and monthly retail sales. The MPC “dove” Adam Posen will give a speech today.

EUR/USD: updates Europe cheered the markets up with positive data: both German and European ZEW economic survey beat expectations, while Spanish and Greek auctions were successful enough. Spain sold 3.18 billion euro of 12- and 18-month debt out of targeted 2-3 billion euro. The yields were higher, but that wasn’t a surprise. Euro zone’s core CPI growth accelerated from 1.5% in February to 1.6% in March (y/y), while the headline CPI added 2.7% versus the forecast of 2.6%. At the same time, it seems that the market participants hurry to take profit. Nobody believes in euro ability to strengthen. EUR/USD posted daily maximum at $1.3172, but the retreated to the levels around $1.3145. It’s necessary to note though that the pair managed to stay above 100-day MA which is now playing the role of support. All in all, trading is quite volatile today. Euro will get chance to rise to $1.3380 (April 2 maximum), if it overcomes the recent highs in the $1.3210 zone.

Key options expiring today Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT). Here are the key options expiring today: EUR/USD: $1.3000, $1.3090, $1.3125 and $1.3150; GBP/USD: $1.5800 and $1.5815; EUR/GBP: 0.8200 and 0.8250; USD/JPY: 80.50, 80.75, 81.00 and 81.10; USD/CHF: 0.9265; AUD/USD: $1.0200, $1.0220, $1.0285, $1.0300, $1.0310, $1.0400.

EUR/JPY: technical levels According to JPMorgan Chase technical analysts, the EUR/JPY is approaching to its support zone (104.25 -104 yen). On the Fibonacci chart, the 50% retracement between a January low and a March high lies at 104.24 yen. Analysts expect the currency pair to bounce from these levels. Strategists at Jyske Bank recommend selling EUR/JPY with a stop-loss at 107.52 yen. In their view, due to strong declines on Friday and Monday this is the first significant resistance for the pair. However, on a daily Ichimoku chart resistance is seen at 106.15-106.30 levels (above the cloud). Moreover, the RSI indicates divergence. Analysts see strong support in the 103.5-104 yen area.

Japan pledged $60 bln to expand IMF’s firepower Japan said today that it provide $60 billion in loans to the International Monetary Fund, which acts as a lender of last resort for governments, in order to increase the fund's financial firepower and stop the contagion with the euro zone debt crisis. Japanese Finance Minister Jun Azumi encouraged European authorities to take more action in return. The Fund wants to boost its funding by $600 billion. However, the IMF will face serious difficulties trying to secure firm commitments at meetings of the fund, the World Bank and the G20 this week: the US has showed reluctance to find troubled economies, while such nations as China, Brazil and Russia don’t rush to give commitments either. The IMF Managing Director Christine Lagarde claimed last week that the fund may need less money as economic risks had subsided. Reuters reports that $400-$500 billion sum seems more likely. Euro zone countries have committed about $200 billion and other European Union nations an additional $50 billion. There was speculation that big US bank have been buying on behalf of the IMF over last 24 hours. This process may continue during the European and North American sessions.

Euro down before Europe's data The common currency weakened against the greenback before Europe’s data releases. German ZEW Economic Sentiment index is forecasted to decline from 22.3 (a 21-month high) to 19.7. Spain will sell 12-month and 18-month bills today. On the back of the deepening crisis country’s borrowing costs may grow. Yields on the nation’s 10-year notes touched 6.16% yesterday, edging toward the 7% level that may require international help. The euro’s yesterday’s growth (EUR/USD strengthened to $1.3147) is nothing but a short covering. Early Tuesday the common currency trades in the $1.3090 area. Resistance lies at $1.3147 (yesterday's top), $1.3264 and $1.3380 (April 2 maximum), while support – at $1.2994 (yesterday’s low), $1.2880 and $1.2754. Moving below yesterday’s bottom or above yesterday’s high may define a trend of the euro.

NZD expected to weaken The New Zealand dollar may weaken this week because the Reserve Bank of New Zealand is expected to leave the official cash rate (OCR) at 2.5% level due to CPI forecasts. Release of a quarterly consumer price index (CPI) is scheduled on Thursday, April 19. Economists expect the CPI to have risen by 0.6% in Q1 vs. a 0.3% decrease in Q4 2011. According to experts, the RBNZ will have little reason to raise interest rates this year. The CPI was probably driven up by an increase in the government excise on tobacco. New Zealand's food price index (FPI) released this morning showed prices fell 1% in March vs. 0.6% increase in February, adding to evidence that inflation level is favorable. In March Reserve Bank Governor Alan Bollard held the official cash rate at 2.5% saying the strength of the kiwi would keep interest rates lower for longer. Analysts at Barclays Capital expect the CPI to surprise to the upside at 0.7%. Key interest rate is unlikely to be cut further, because it remains at a historic low since March 2011. Analysts expect the AUD/NZD to strengthen. According to currency strategists at RBC, the New Zealand dollar is overbought. Moreover, they add that low risk sentiment weighs on the commodity currencies, including the kiwi. The New Zealand dollar may also be influenced by the results of the Spain bond auction held on Thursday. However, the kiwi should benefit from China’s trading band widening, because the country is expected to reduce the monetary reserves and to increase buying of trading partner currencies, such as the kiwi and Aussie.

Banks' forecasts for FX majors Forecasts are submitted on April 13 Source: FX Week