A welcome breather for the euro currency

European Union leaders have apparently managed to reassure the markets with a message of support to Greece during the EU summit held on March 25 and 26, at least in the short term. The aid package to Greece, however, involves significant participation of the International Monetary Fund.

This solution, which satisfies the German government, however, is not to the liking of Jean-Claude Trichet, ECB president, who has not failed to note that IMF intervention was very negative for the eurozone. Meanwhile, Standard & Poor's, a major rating agencies, stated that Greece will remain at BBB +.

Before the publication of consumer prices in the eurozone yesterday, Mr Trichet stated that he did not anticipate inflationary pressure. The euro should continue to rise during the coming days to reach levels close to 1.3550/1.3600 against the US dollar. The publication of unemployment figures in the US tomorrow and the Easter long weekend will certainly slow this correction at the end of the week, and a further decline of the single currency could well happen at this time, especially if, as the market anticipates, the creation of jobs for the month of March in United States is back above 190,000 units.

In Great Britain, the final GDP figures published on Tuesday for the fourth quarter of 2009 did not bring significant changes and we remain bearish on the pound in the short term. We anticipate a new test of the levels 1.4760/1.4800 this week.

The USD/JPY pair seems to finally be going up like we anticipated for several weeks. Following the publication earlier today of the Tankan index for the last quarter of 2009, a leading barometer of the mood of Japanese businessmen and their confidence in the future, the Japanese authorities have more information to eventually opt for new measures to lower their rates.

The US dollar last week broke above both the 200-day simple moving average at 91.58 and the multiyear downtrend line at 91.88. The trend line had not been breached since the start of this decline in USD/JPY on June 22, 2007. On that day, the dollar reached 124.14 against the yen. From then on, it attempted to break this line between July and September of 2009 but fell short each time. On the other hand, the 200 day SMA has resisted since August 2009, with August 13 being the last day USD/JPY closed above this line.

With last week's impressive rally, with a break of these two key resistance levels, we remain bullish on the dollar against the yen with 93.70/94.00 short term objective, 2010 high, while any setbacks should be well supported in the 91.00 area.

Upcoming FX Key events

Today: Eurozone Manufacturing PMI& US ISM Manufacturing.

Tomorrow: US Non-farm Payrolls & US Unemployment Rate

FX Technical Key points

EUR/USD is bearish, target 1.3000, key reversal point 1.4200
USD/JPY is bullish, target 98, key reversal point 85
GBP/USD is bearish, target 1.4750, key reversal point 1.5700
USD/CHF is bullish, target 1.1000, key reversal point 0.9950
AUD/USD is bearish, target 0.7800, key reversal point 0.9400
NZD/USD is bearish, target 0.6200, key reversal point 0.7650

Mr Bovay is senior trader at RTFX Ltd.

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