Currency Insight ( May 22, 2015)

Rigging of Foreign Exchange Market Makes Felons of Top Banks

For the world’s biggest banks, what seemed like the perfect business turned out to be the perfect breeding ground for crime. The trading of foreign currencies promised substantial revenues and relatively low risk. It was the kind of activity that banks were supposed to expand after the 2008 financial crisis. No one government agency is responsible for policing the currency market, leaving it up to committees, some run by the banks themselves, to set guidelines. And even when federal authorities adopted rules to rein in Wall Street a few years ago, they exempted certain foreign exchange transactions, a little-noticed concession to banks.

USD/JPY declines after BoJ holds

Japan left its monetary policy unchanged and as the previous session’s U.S. data continued to dampen demand for the greenback. USD/JPY hit 120.67 during late Asian trade, the pair’s lowest since May 20; the pair subsequently consolidated at 120.69, shedding 0.29%. The pair was likely to find support at 119.80, the low of May 19 and resistance at 121.48, the high of May 20. At its monthly policy meeting, the BoJ kept its monetary policy on hold and signaled growing confidence in the strength of the economy.

Asia stocks mostly rise as dollar gains after robust US data

Asian stocks were mostly higher Wednesday as a rebound in U.S. home construction and a surprise announcement by the European Central Bank to frontload bond buying sent the greenback higher, giving a boost to Asian exporters.

EUR/USD halts skid as investors monitor Greek developments in Riga

Investing.com — EUR/USD inched up on Thursday halting a four-day skid, as the timing of an interest rate hike by the Federal Reserve and the prospect of a Greek default on its sovereign debt remained in focus The pair gained .0017 or 0.15% to 1.115, trading in a tight range of 1.1081 and 1.1181. One session earlier, the euro fell below 1.11 against the dollar for the first time in the month of May. EUR/USD opened the week at 1.1447. EUR/USD likely gained support at 1.1070 the low from April 30 and was met with resistance at 1.1326 the high from May 19.

On Thursday night, European leaders convened in Latvia for a two-day summit in Riga. Greece prime minister Alexis Tsipras, Germany chancellor Angela Merkel and France president Francois Hollande were expected to discuss a potential extension to the euro zone’s bailout to Greece, according to reports. Currency traders reacted to disappointing economic on both continents Thursday, on a day of choppy trading.

Important events and their explanation:

Time ( IST)	Currency	Economic Data	Expectation	Previous
5:30am	USD	FOMC Member Fischer Speaks	49.4	48.9
9:19am	USD	FOMC Member Williams Speaks	48.6	48
1:00pm	JPY	Monetary Policy Statement	51.9	52.1
2:30pm	JPY	BOJ Press Conference	0.40%	-0.50%
	EUR	ECB President Draghi Speaks
3:00pm	EUR	German Ifo Business Climate	108.3	108.6
4:15pm	GBP	Public Sector Net Borrowing	7.8B	6.7B
5:30pm	GBP	MPC Member Shafik Speaks
7:00pm	GBP	BOE Gov Carney Speaks
	USD	CPI m/m	0.10%	0.20%
8:00pm	USD	Core CPI m/m	0.20%	0.20%
	EUR	ECB President Draghi Speaks
	GBP	BOE Gov Carney Speaks
11:30pm	JPY	BOJ Gov Kuroda Speaks
	USD	Fed Chair Yellen Speaks

Explanation:-

JPY –  BOJ event is too important for the ahead sessions, because looking at the growth numbers we BOJ might not signal any further QE hence negative for markets.

GBP –  We expect it to remain same, any change would create significant impact on GBP.

USD-  Market is heading for the most important event of the week i.e Fed chairman speaks. We assume a dovish tone this time means positive for bullions.

Technical touch :

 

As seen pair is trading near its crucial support of rising trend line in a 120 mins chart. Intrestingly its also forming a bearish flag pattern but tredline not yet pierced.

For the next few sessions we assume if pair pierced its 63.68/64 levels the next downside target would be 63.38 levels.

Support is expected to be around 63.40/50 levels and resistance 64.00/30 levels.

EUR INR

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After a prolonged downtrend pair tried to form its base and RSI moved into bullish territory.

As seen RSI is trading near its rising trend line. Hence we assume INR might appreciate till 70.55/40 levels

Support is expected to be around 70.38/69.90  levels and resistance 71.63/78  levels.