USD Yesterday the greenback continued to depreciate against the majors. It fell to a fresh two-year low against the EUR after the release of US core consumer prices excluding food and energy costs, which came in at 0.1% which was lower than market expectations and the smallest increase in three months following a 0.2% gain in February. This news bolstered expectations that the Federal Reserve will look to lower interest rates this year and combined with the fact that industrial production released in negative territory at -0.2%, was enough to drive the dollar back onto the bear wagon. On the other hand, positive data from the US such as the unexpected rise in housing starts and the continued rally of the Dow Jones Industrial Average was completely shrugged off renewing worries among investors that the US economy may be slowing compared with the solid growth in Europe and Asia. Without any further significant US data to be released this week it seems that the dollar will continue on its bearish trend and could head past the 1.3600 level against the EUR and drop even further against the sterling which leaped passed the historical $2 mark yesterday, it’s highest in over a decade. The directions that carry trades will take and the momentum of the EUR and GBP will play an important role in determining whether this continued bearish trend will materialize. EUR The ZEW Center for European Economic Research reported yesterday that its index of investor and analyst expectations increased to 16.5, from 5.8 in March, surpassing the expected reading of 10. German investor confidence has risen to a 10-month high in April which is a sure sign that Europe’s largest economy is accelerating. Also the Euro zone trade deficit shrank to -1.7bn from a previous figure of -7.0bn, beating market expectations of a -5.0bn figure. The result of these better than expected figures was that in Yesterday’s late afternoon trading the EUR was up to 1.3564 against the USD, after reaching a two year high of 1.3595, less than 1 cent below a record high of 1.3670. The high level of the EUR could eventually draw some criticism because it leads to higher export prices and Germany is highly dependent on exports. The positive momentum of the EUR should continue as there is room for a further rate hike without retarding economic growth and this sentiment seems to be shared by the ECB, with a rate hike expected in June. Today there is no significant data being released and we should see the EUR push past the 1.3600 level against USD before making surge in the near future towards the record high of 1.3670. JPY Yesterday the JPY won some reprieve against high yielding currencies following a sharp fall on Monday on the back of the G7 meeting that glossed over the issue of the yens recent weakness. Against the JPY, the USD fell 0.7% to 118.88. The BoJ Governor Fukui has warned that they will be looking to raise interest rates but the bottom line is that deflation is a major concern for Japan and with their rock bottom yields not expected to move anytime soon, the JPY remains the funding vehicle of choice for carry trades. Today there is no important data coming out of the Japan but changes in flows and sentiment may bring about some sharp movements. It is widely believed that the JPY will continue on its bearish trend as investors dump it for higher-yielding currencies and assets in pursuit of carry trades. EUR/USD The pair is consolidating at 1.3590 after a relatively quiet night of tight range movement. Daily charts are bullish with plenty of room to extend. Hourly studies are unwinding from overbought levels and support the bullish trend. Next target price is 1.3640. GBP/USD The cable is at a record high of 2.0100 with great confidence. Daily studies have never been more bullish, and are signaling that a further break through the next resistance level is imminent. The hourlies present no threat to the very impressive record price levels. USD/JPY The volatility is high. Bollinger bands are parallel and form the trend. The 4 hour chart indicates bearish pressure on USD JPY. The downtrend should continue to gather momentum as the price should find support above 118.50/118.40. In case of a break, the support is around 117.70. USD/CHF The pair’s volatility might decrease as the Bollinger bands are beginning to tighten. The 1 Hour chart is in a bearish configuration. The downtrend might continue to 1.2000 which is also a very strong local support. Wild – EUR/JPY The pair is touching the lower barrier of a very distinct upward channel on the 4 hour chart. The slow stochastic is showing a bullish cross at that time frame, which offers Forex traders the opportunity to jump in at a good low price before the pair continues the inevitable uptrend.