Safe haven currencies enjoyed solid demand over the past week as the standoff over the Crimea region remained in focus. Concerns over China’s slowing economy are also one of the major focal points of the year so far, with surging debts in the corporate sector stealing investors’ attention.

The Japanese yen is the strongest performing currency for most of the month of March so far, with gains surpassing the one percent mark versus most of its major rivals. The Nipponese currency benefits from forex investor’s flight to safety. Market analysts attribute the strengthening of the yen to the ailing Chinese economy and the fall of the Chinese yuan.

The yuan continued to slide against the US dollar as data out of the world’s second largest economy continued to highlight the slowdown of the economy. Worries over China’s problems have surpassed those concerning the Federal Reserve tapering its stimulus, according to a survey of global investors by Barclays. It is down more than 2.3 percent against the greenback so far this month.

Crimea says Russia

Over the weekend, a vote in Crimea to join Russia passed with no major incidents. Despite a ninety-five percent vote in favor of joining Moscow, anxiety ebbed at the start of the week after the United States and European Union imposed – which in many people’s eyes seemed too modest – economic sanctions on Russia.

Global stocks rallied strongly on Monday, bouncing back from a one-month low, as equity markets didn’t suffer the same risk adverse sentiment as the currency market. US Treasuries fell, and the yen and Swiss franc eased from their recent peaks.

The sanctions imposed were seemingly not near harsh enough to escalate tensions between Ukraine and Russia. However, demand for flight-to-safety currencies abated slightly at the start of the week; Bloomberg Correlation-Weighted Currency Index showed the Japanese yen was up 0.90 percent against a basket of its major rivals over the past week. The Swissie was also in green, and was up 0.80 percent over a monthly period.

Russian President Vladimir Putin supported the request by the Crimean people to join Russia, and he said Moscow should sign an accession treaty to absorb Crimea.

Yen crosses slip lower

USD/JPY hit a two-week trough on Friday of last week, by 101.21 but bounced slightly to trade around 101.55 at the time of writing. The pair is down from its calendar year peak of 103.76 hit earlier this month. EUR/JPY has also slipped sharply since the start of the Crimean crisis, and touched 140.45 last week.

Japanese yen is likely to remain supported by geopolitical tensions between the East and West over Ukraine and by continuing concerns over China’s slowing growth and liquidity concerns. Should a slide in USD/JPY breach the 101.20 region and eventually 100.75, we could see the pair test the psychological 100 level. EUR/JPY is on a solid overall uptrend, but a breach of its rising trend line, now around the 141 levels could see the pair accelerate lower, especially if the euro struggles to maintain its recent strength.

Fed expected to change to qualitative guidance

Meanwhile, the Federal Reserve started its two-day FOMC meeting on Tuesday, the first with Janet Yellen as Fed Chairman. The Fed is expected to move away from keeping thresholds on specific indicators as a benchmark for when to raise rates. Instead of keeping the 6.5 percent jobless rate as a threshold for future rate hikes, policymakers are expected to adopt more qualitative guidance to consider raising rates. The FOMC is expected to announce it will use a more holistic range of economic indicators.

EUR/USD has been pushed higher since the European Central Bank decided not to introduce new stimulus measures earlier in the month. The pair hit 1.3967 last week, and may try to test the 1.40 mark, especially since traders, who had seen an end to the zero rate policy in sight with the 6.5 percent jobless rate target almost attained, may decide to dump the greenback if policymakers change to the new guidance strategy. However, the strong euro is beginning to pull its weight on recovering euro zone economies.

Gold surge pushes commodity-bloc currencies higher

Commodity-linked currencies such as the Aussie and kiwi have enjoyed support from surging a gold price. The shiny metal hit $1’392.30/ounce at the start of the week, and may test the $1’400 mark unless the Fed surprises with more than expected tapering of its stimulus program. AUD/USD has consolidated above 0.9000 and may try to approach 0.9445 from here. NZD/USD is on a strong rally, and bullish traders will look to test the 2013 high by 0.8676.

Technical Key points:

EUR/USD is bullish, target 1.4000, key reversal point 1.3700. EUR/GBP is neutral. USD/JPY is neutral. GBP/USD is bullish, target 1.6900, key reversal point 1.6250. USD/CHF is bearish, target 0.8575, key reversal point 0.9000. AUD/USD is neutral. NZD/USD is bullish, target 0.8675, key reversal point 0.8400. Gold is bullish, target 1'400.00, key reversal point 1'328.00