EUR/usd
It's hard to decide what to do with the dollar when a batch of good news is followed by a series of poor figures. The dollar was actively bought after the Fed's policy had been revised in favour of greater strictness, but then the poor news on employment and inflation added to the tough rhetoric from the fomc officials. That uncertainty made the euro/dollar fluctuate between 1.30 – 1.31. In the middle of the week the pair attempted to draw the reversal pattern on the speeches of the CB's officials which boosted the market growth and consequently supported the demand for risky assets and helped the euro to find its buyers. However, already on Friday the growing fears for the euro zone and Spain in particular changed the situation. At the beginning of the last week the widening of Spanish bond spreads caught the eye of economists only, but since Friday the eurozone affairs have been bothering traders, forcing them to get rid of the bonds and sell the single currency. On Friday the cost of protection against default of Spanish government bonds hit the historic high. Today the markets have resumed their decline. The Japanese Nikkei has fallen down to 1.6%, pushing EUR/USD to 1.30. In February and March there were two attempts to drive the pair below the key support level, but both times ended up with a bounce. There is a feeling that this time the bulls will gain the upper hand. The wave of sales has risen from as low as 1.32 against 1.33 and 1.34 in the previous two months. In addition, as has already been mentioned, by summer the American economy is expected to slow down heavily and Europe is forecasted to bear the brunt of expenditure cuts. Without going too far, this Thursday Spain is likely to enjoy the market favour as the government needs to put up its 2 and 10-year bonds.
GBP/USD
The optimism about Britain vanished swiftly when the markets got seized by the fear for the stability of the Spanish banking sector. The sterling didn't manage to go above 1.60 and the failure to test new highs triggered a wave of stop orders, which pushed the pound/dollar down to 1.5830. However, since the sales were mainly caused by the ongoing fears about Europe, EUR/GBP also went into decline and hit new lows. Now the pair is about to break the 0.82 point, the lowest level since September. Nevertheless, we still believe that the further perspectives of the pair are not connected with the continuation of the decline: the levels will be too low. Even then, in 2010, the trading at these levels didn't last for long. The Bank of England and the government are not only concerned about the cheap pound, but have already proved more than once that they are ready to do their best to achieve this target.
USD/JPY
Miracles do happen, but they cannot last for ever. The Japanese yen is again in demand and USD/JPY is about to recoup half of the growth it achieved in the period from early February till mid March (from 76.0 to 80). USD/JPY is now approaching the level of 80 and it's of interest if there will be something to stop the pair in this area. Now we have dim hopes for the ECB's intrusion in the Spanish affairs, which will ease the market fears and, as a result, boost the sales of the Japanese yen at the expense of high-yielders.
AUD/USD
The aussie sales have been running for 2 days in row, but the currency is still above the levels, from which it started rallying on the domestic labour data. We remind that Thursday's pessimism about the pair dispersed swiftly after the release of the positive employment data (employment growth by 44K in March) and surge of the expected inflation, which will be able to tie the RBA's hands before another cycle of rate cuts.
