Weekly Market Review 19th March 2012

Weekly Market Review

19^th March 2012

Consumer sentiment in the U.S. showed an unexpected decrease in the month of March, according to a report released by Reuters and the University of Michigan on Friday. The report showed that the consumer sentiment index fell to 74.3 in March from 75.3 in February. While, Industrial production in the U.S came in unchanged in the month of February, according to a report released by the Federal Reserve on Friday. The report showed that industrial production was unchanged in February after rising by a revised 0.4 percent in January. In addition, the Labor Department released a report on Friday showing a moderate increase in U.S. consumer prices in the month of February. The Labor Department said its consumer price index rose by 0.4 percent in February following a 0.2 percent increase in January. The events in the U.S which are likely to affect the market this week are; Tuesday, official data on building permits and Fed Chairman Ben Bernanke speech at an event in Washington; Wednesday, existing home sales data; Thursday, official data on initial jobless claims and Fed Chairman Ben Bernanke speech at an event in Washington; Friday, official data on new home sale.

Japan's leading index improved, but at a pace slower than initially estimated in January, final data from the Cabinet Office showed Friday. The leading index rose to 94.4 from 93.3 a month ago. The reading for January was revised down from 94.9. Economic event in Japan which is likely to affect the market this week is the official data on the trade balance, which will be released on Monday.

Eurozone's trade balance slipped to a deficit in January, data released by statistical office Eurostat showed Friday. The trade balance was a deficit of EUR7.6 billion in January, compared to a surplus of EUR9.1 billion in December, which was revised down from EUR9.7 billion. Additional news from Europe is that, Credit-default swaps dealers will hold an auction today to settle as much as $3.2 billion of Greek bond insurance triggered by the nation’s debt restructuring. The auction will be held under the rules of the International Swaps & Derivatives Association and will determine the amount that sellers of protection must pay by setting a recovery price for Greek bonds. An initial rate will be set at 11 a.m. London time with a final value determined at 3:30 p.m., according to a report published by Bloomberg Monday. Events in the Euro zone which are likely to affect the market are; Monday, Eurozone Current account report; Tuesday, official data on producer price inflation in Germany; Wednesday, data on manufacturing and service sector activity and official data on industrial production in the Eurozone and European Central Bank President Mario Draghi speech on its monetary policy.

EUR/USD: The euro traded higher against the U.S. dollar on Friday, after soft U.S. inflation data dampened demand for the greenback, which had rallied earlier in the week on the back of diminished expectations for further easing by the Federal Reserve. Today, the pair was trading at 1.31657 (around the 38.2% Fibonacci level of the last falling wave) at the time of writing and the latter is likely to suffer from profit taking and market correct following the significant increases registered Friday ahead of the current account report in the Eurozone and the Credit-default swaps of Greek bond. Positive news from Europe might push the EUR/USD higher to test the key level of 1.32000. The resistance level is 1.32263 and the support level is at 1.311194

USD/JPY: The U.S. dollar gave up some of last week’s gains against the yen on Friday. The pair fell from an 11-month high but the yen remained under pressure amid expectations for more stimuli from the Bank of Japan. The USD/JPY was trading at 83.384 at the time of writing and the pair is likely to fluctuate within the resistance level of 84.146 and the support level of 82.831 as there are no major fundamental news in the U.S and Japan today. News for Europe and Market sentiments will be driving the market today. Investors should adopt a wait and see strategy on the pair. Positive news from Europe might boost the demand for risky assets and might drag the USD down against its major counter parts. Thus, we might see the pair hovering around 82.775 (38.2% Fibonacci level of the last rising wave) later today. Prudence recommended.

GBP/USD: The pound posted strong gains against the U.S. dollar on Friday, as soft U.S. inflation data dented demand for the greenback and pushed sterling to an eight-day high. The GBP/USD was trading 1.58470 at the time of writing and the pair seems likely to suffer from profit taking and market correction. Positive data Europe might boost the demand for GBP and push the pair further up to test the resistance level of 1.58805. The support level is at 1.57978. Investor should remain cautious.

GOLD: Gold prices were largely unchanged in volatile trade on Friday, as investors continued to rebalance their portfolios amid growing optimism over the U.S. economy. Today, the yellow metal was trading in narrow range of $1664.70 and $1658.18 an ounce and the metal is likely to fluctuate within the resistance level of $ 1682.24 and the support level of $ 1639.77 an ounce. Market sentiments will be influencing the direction of the commodity today due to lack of fundamentals in the U.S. Investors will monitor the movements of the USD, as the USD often trades inversely to gold. It will be a good strategy to wait for the latest developments in Europe and the U.S, before taking a position on gold.

DOW: U.S. stocks finished Friday mixed to lower after a lackluster trading session, with investors selling on news that pricing and industrial output data came in a little softer than expected. DOW was trading at 13178.7 points at the time of writing and the index is more likely to fluctuate within the resistance level of 13222.7 and the support level of 13108.1 points ahead of some fundamental news which will be released in Europe later today. Market sentiments will be driving the market today and investors should be very cautious. A wait and see strategy is recommended.