The euro hit its lowest since March, trading at 1.4048 against the dollar, after IMF head arrest
Many forex investors now fear that this case will be the catalyst for the continuation of the euro drop in the coming days or weeks. The event came in just before an important Eurogroup meeting where EZ Finance ministers had to discuss the measures to take in order to help Greece with its lingering debt issue and to finalize the aid package for Portugal. Mr Strauss-Kahn had played a key role in the talks with the Greek authorities and without its chief, the IMF could strengthen its position. The potential election of a new non-European director in the coming months could weigh on European financial aid in the future.
US and European inflation continue to rise
Rising commodity prices slowed down last Friday and that will most probably support the FED’s stance which has the difficult task to ensure price stability and full employment. Annual inflation came in at 3.2% from 2.7% while the core inflation (excluded food and energy) rose by a marginal 1.3% from 1.2%. Based on these data, we see that headline inflation is largely due to an increase in food and energy prices while core inflation puts little pressure on the Fed for a rate hike. In general, forex investors see no rate hike before 2012 and anticipate a smooth exit of the QE2 in June.
The data released yesterday over the Eurozone inflation give support to the single currency where a rate hike is still anticipated soon. From a technical point of view, we don’t anticipate a fall below 1.3960 for the this week while we could see as well a correction towards 1.4350.
Ahead of us this Wednesday Japan’s GDP
The data from Japan which will be released this Wednesday will give a better idea of the development of the GDP, a few months after the tsunami that hit the island. A weak GDP will force the BoJ to inject additional liquidity to the financial system. seems willing to keep below the resistance area for now between 81.40 and 81.95 and if the resistance doesn’t break, we anticipate a new drop towards 80.20 or even 79.50 this week. After losing 3% last week, the should encounter some resistance towards 114.80 for a new fall around 112.70 this week.
This article has been prepared by Frederic Gay, CEO - Realtime Financial Technologies.
Translation by C. Kodomaris