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Greece tried to accuse the IMF again of attempt to undermine the agreement on financial aid

Last week a two-month volatility ran out in 48 hours, and speculators and swing traders could make a substantial profit. A dollar rate has failed to collapse facing the weak publication in regards to the GDP of the USA. A 380 points drop of USD/JPY has looked like a well-planned provocation. RBNZ was less careful, than it was expected, but the sharp growth of NZD/USD has hit the large branch interests.

Last month was very heavy for US dollar. The FOMC hasn't disappointed - it has not been expected to provide anything new. From the accompanying statement the reference to the «risks of dynamics of the world markets» has been deleted, at the same time it has been clearly stated that conditions have been improved, but no urgent measures with regard to them would be undertaken. An increase of the rates has been postponed at least for 2-3 months and only extremely good economic data can break this tendency.

The bank of Japan hasn't added changes to its credit policy, since the official reason for this is an insufficient research of the consequences of the introduction of the negative interest rates in January 2016. The deadline for the achievement of 2 per cent target inflation rate has been once again postponed, so that weakening of the monetary policy will have to be the following political step. It is difficult to understand why the market so hoped for the QQE expansion, since on April 25 Abe Hond's adviser stated that the possible mitigation would take place not earlier than in June, and, knowing of the close cooperation between the BOJ and the government of Japan, he hardly expressed his personal opinion. It appears that the yen is intentionally pushed down to the price of large offer 105.00 from where the Bank of Japan will be forced to interfere as such government policy is considered to be unacceptable. Nevertheless, the traditional interventions are quite possible also from the current levels.

In the interview to the Bild magazine Draghi has defended the present expansionist policy of European Central Bank and has stated that the threats of the European Union independence cause uncertainty of the business and consumers. Consequently, it can provoke more rigid actions of the European Central Bank for maintaining price and economic stability. It has been also announced that in case of the adoption of the decision on an exit from the EU, the European Union will demand from the UK very fast (no more than 2 years) and rigid financial «divorce» and establishment of the new relations will be possible only after a full mutual settlement.

The raw materials market started reacting nervously to the lack of deliveries from the unstable export countries. While all attention has been drawn to the summit in Doha, analysts allegedly haven’t noticed that offer in the oil market is more influenced by the reduction of deliveries from Libya, Nigeria and Colombia. But for the shutting down of the oil deposits, terroristic acts and obstruction to oil pipelines in these countries, surplus of oil would have increased by 800 thousand barrels therefore the decision on the production restriction, of course, is important, but the situation with the actual deliveries has to lead to the price increase in the long term perspective.

From the other news it is possible to point out the following:

  1. The Saint Petersburg Stock Exchange plans to trade Urals with the price which won't be fixed to Brent – the Russian oil by November 2016 would have been influenced by the independent pricing within the country. Technically, it will be implemented via the separate futures with a basic asset of 1 barrel of the Russian oil, and the indicator is expected to be launched by the end of 2017. Thus, there are some attempts to create a possibility of the oil sale at the price which is higher than in the European market.
  2. Greece tried to accuse the IMF again of attempt to undermine the agreement on financial aid. Nevertheless, the negotiations with the creditors renewed on April 25. Several EU commissioners have declared that 90% of a package of measures for cut in expenditure are agreed, including pension and tax reforms, as well as additional steps which must be taken if Greece did not manage to achieve the objectives under the budget (surplus in 3,5 per cent of the GDP by 2018). Ministers of the Eurogroup will attend the meeting on Greece on May 9.
  3. After the German labor unions of the metallurgical industry didn't manage to agree on the increase of the salaries, precautionary strikes will be held starting from May 1. The fuel to the fire is added by Draghi's appeals to the German bank investors to look for the other tools for investment, than the cash deposits, and the statement of the French Minister of Finance about the refusal of France and Germany from the part of sovereignty and a financial autonomy for strengthening of the European unity. The protests in France against the labor market reform lead to suggestion that there are planned actions against the governments of the leading EU countries.
  4. This week the main currencies trends have spoiled the mood of the currency experts of the serious banks: a sharp growth of "kiwi" has forced to close losses of BNP, Goldman Sachs, Societe Generale, and in couple of days of Credit Suisse. Unexpected strengthening of yen has also influence Goldman and Credit Suisse, but as it has appeared, the appropriate rate for yen has led Deutsche Bank to impressive result of more than 995 points of profit. Except trading USD/JPY, the Deutsche Bank makes profitable purchases of yen against AUD and CHF at present.

The next week also promises to be volatile: the RBA meeting, a quarter statistics of the labor market of New Zealand and the next US Non-Farm Payrolls are expected. But there are big doubts that this report and two indexes of business activity will provide to dollar essential support. We are watching Asians - surprises are possible.

EUR/USD: the next intraday resistance: very strong (1.1483-1.1475), further (1.1521-1.1536) / (1.1575-1.1600). Intraday supports: (1.1410-1.1395) / (1.1335-1.1320) / (1.1284-1.1250). We don't forget that there are powerful offers starting from 1.1450/1.1500/1.1520 on EUR/USD. Some pent-up demand for dollar has switched to closed options. Nevertheless, the most part of transactions are still in the market and will be actively protected at such levels.

USD/JPY: as a border for risks 109.00 acts so far. The next intraday resistance: (107.39-107.49), very strong on (107.87-108.58). The next supports: (106.21-106.16) / (105.85-105.72), very strong supports: (105.32-105.19). The scenario is rather negative so far, but the technical kickback has already ripened. If there are no interventions until Friday, then NFP will modify all levels.

Author: Navsher Bartash,
ForexChief Currency strategist