The dollar strenghtened yesterday, while the stock markets gave back their recent gains.

[RTFX-Trading]

What's new:

Zhou: Called for a new international currency to replace the greenback as the world's reserve currency.
FED: Started buying treasury bonds.
FED: Officials have different opinions.
EuroZone: Surprise rise in PMI.
UK: Inflation increased for the month of February

Today:

10h00 Germany: IFO Business Climate Index.
12h00 UK: CBI Distributive Trades.
13h30 United States: Durable Goods Orders.
14h00 Central Bank of Norway: Monetary Policy Decision
15h00 United States: New Home Sales

Overnight Ranges & Indices:

EURUSD: 1.3441 - 1.3497
USDCHF: 1.1288 - 1.1324
GBPUSD: 1.4638 - 1.4721
USDJPY: 97.36 - 98.35
DowJones: 7660 -1.49%
Nasdaq: 1234 -2.02%
Nikkei: 8480 -0.10%
Gold: $926

Comment:

The EURUSD traded in the range 1.3441 and 1.3497, while the USDJPY remained at 97.36 and 98.35.
The decline in stocks yesterday had a bearish effect on the "Carry Trades", Australian dollar, New-Zealand dollar, UK pound and euro, were all in a slight decline, while the Yen and Swiss Franc are under pressure. The dollar is still benefitting from its status as the reserve currency.

Perhaps a face-off between the United States and China is in store in the near future. The governor of the Popular Bank of China (PBOC) Zhou, called for a new international currency to replace the Greenback as the world's currency reserve. These recent statements have so far been totally ignored by the markets, while China should in future limit its purchases of Treasury bonds and diversify its foreign exchange reserves.

The Fed revealed that Treasury bond purchases begin today. The purchases will be for maturities from February 2016 through to February 2019. Fed officials are divided on the risks of inflation/ deflation. Accordingly, there is a legitimate risk of the US dollar continuing to weaken should Fed credibility on its ability to drain liquidity in the future get questioned.

Yesterday, we noted a return of some traders on the options market. One of them has purchased a very large amount of Put Euro/ Call Dollar maturity 1 month, at strike price of 1.3000. Thus we have experienced a small correction yesterday, therefore it may be a good opportunity to take long positions in the zone between 1.3375 and 1.3425.

Good Day.

Nicolas Longchamp
Trading desk.
Realtime Forex.
Geneva/Switzerland.