USD ending the week on a strong note. Resilient US equity market session brought JPY crosses back from the abyss once again.

Weekly candlesticks suggest USD may have found a cyclical low for now. US markets close and London out for a 4-day Easter holiday weekend.

MAJOR HEADLINES – PREVIOUS SESSION
Overnight developments:

• US Mar. Philadelphia Fed Survey out at -17.4 vs. -19.0 expected
• US Weekly Initial Jobless Claims out at 378k vs. 360k expected

THEMES TO WATCH – UPCOMING SESSION
Key event risks today (all times GMT):

• US Major Markets closed for Good Friday. London Easter holiday both today and Monday.

Market Comments

Yesterday marked the end of this holiday-shortened trading week, and looking back at the action, if we make the hopefully not too bold assumption that currencies close around current levels considering today's North American and European holiday, it looks like we may have seen a key reversal week for the USD, at least for the medium term. Looking across the USD majors, we find an entire catalogue of candlestick reversal formations. EURUSD sports a climactic dark cloud formation, USDCHF and USDJPY posted monstrous bullish hammers, and GBPUSD features a textbook evening star formation. AUDUSD and USDCAD saw huge weekly moves in favor of USD as well, with both crossing their 55-day moving averages this week.

Thursday's strong performance in equities halted the slide begun on Wednesday and kept the JPY crosses from sliding into the abyss once again. EURJPY flirted with final support below 152.00 before shying away from a deeper sell-off on signs of risk willingness in equities.  We're not sure how to interpret this seeming positive mood in equities. First, we're a bit reluctant to attempt to extract meaning from yesterday's action as it was the so-called triple witching day, the day each quarter when futures and options on futures and equities expire. This day is known for its volatility. Also, a glance over at money markets and fixed income suggests a grating divergence in the risk picture as liquidity troubles seem to be mounting precipitously once again despite what appears to be a positive mood on the stock exchanges. US 90-day T-bills yielded 0.57% on yesterday's close!

These latter factors are the ones that most concern us, so our stance heading into next week is to look for a possible continuation move stronger in JPY if the JPY crosses breach those support levels (use EURJPY of around 151.75 and AUDJPY around 88.00 as proxies since USDJPY may find a bit less volatility if the USD is turning stronger here). 

Also, the enormous commodity sell-off this week helps the stronger USD story, and it may take some time for the commodity market to lick its wounds before attempting any serious rally beyond a sharp bounce. This may mean the commodity currencies will remain under significant pressure. Watch for probes of the 200-day moving average in AUDUSD and NZDUSD (when will the dam break for NZD, we continue to ask ourselves.....)

Chart: GBPUSD
The lines in the sand for GBPUSD are clearly drawn. The pair has contended with the 1.9950/70 pivot area on a number of occasions, first as resistance once the pair crossed below 2.0000, and then as support once it broke back above. Now that we have broken back below this level, it will act as key resistance. The next obvious pivot/support level of interest lies in the 1.9730/50 area close to yesterday's lows. This served as resistance in the recent past and now has twice offered support. In addition, this level is close to the 55-day moving average (red line). A fall through this level would open up for the next big support at 1.9340/60. Below that, we have the 200-week moving average, now around 1.8880, which also coincides with the huge rising trendline from early 2002.