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The Washington Post is reporting that Japan’s Nikkei 225 recorded one of its largest-ever drops, closing at 8605.15 — down 10.55 percent. Coupled with Monday’s 6.2 percent drop, the index has plummeted nearly 17 points in the first two business days since the recent disaster. Many of the losses were due to a rapid sell-off that occurred right as Naoto Kan warned about the radiation risks following the crisis at the Fukushima Daiichi power plant.

Written by FastBrokers House

With the situation at the Fukushima Dai-Ichi nuclear plant having taken a further turn for the worse, so general risk-aversion has picked up. European stocks have followed their Asian counterparts trading sharply lower.

EUR/USD down at 1.3880 from early 1.3930, having been as low as 1.3852 after stops tripped through 1.3890.  The release of weaker than expected ZEW data (see above) didn’t help matters.

USD/JPY down at 81.35 from early 81.55. It has to be said that given all that’s been going on it’s been admirably steady.

Buy orders, including Japanese importer interest (especially oil companies,) noted down at 80.80/81.20.  Sell orders clustered 82.05/25 and more up at 82.45/50.  Buy stops gathering in 82.50/60 area.

USD/CHF down at .9210 from early .9235, EUR/CHF down at 1.2790 from around 1.2870. Swiss benefiting for it’s well-documented safe haven status as risk aversion picks up.  Real money was seen aggressively buying Swissy on the crosses this morning.

AUD/USD down at .9885 from early .9970 against the backdrop of raised risked aversion. Model funds very notable sellers right from the get go.

Cable has given up about a cent. Down at 1.6005 from early 1.6115, having been as low as 1.5980.

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Senior strategist Ib Fredslund Madsen provides the overview on a day where investors have been watching the situation in Japan carefully.

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Video courtesy of en.jyskebank.tv

March 15 (Bloomberg) — Uwe Parpart, chief economist and strategist for Asia at Cantor Fitzgerald HK Capital Markets, talks about the cost of reconstruction in Japan following the earthquake and tsunami. He speaks with Mark Barton on Bloomberg Television’s “Countdown.”

Energy shares are firmly lower in pre-market trading as crude oil futures fall to trade below $99 a barrel. Stocks in the sector are weighed by investor concern over the effects of the earthquake in Japan at the end of last week and the potential crisis with nuclear facilities hit by the disaster. SunPower (SPWRA, SPWRB) says Japanese suppliers have indicated that, while certain operations are currently disrupted due to infrastructure issues, they have not sustained major damage to their facilities. Sunpower shares are up 2% in pre-market trading. Meanwhile, Madison Williams reportedly downgraded TransAtlantic Petroleum (TAT) to Accumulate from Buy. The firm cited relative valuation.

A snapshot of the European Morning Briefing covering Stocks, Bonds, FX. Main focus of the markets today is Japan and further explosions at nuclear power plant.

Volatility was higher than usual in the FX markets with global bourses sliding. The crisis in Japan is influencing interrelated markets as the Aussie dollar and Canadian dollar sold off sharply while the Japanese yen and the greenback strengthened.

The AUD/USD traded as low as 0.9814 but paired its losses to open the New York trading session at 0.9860. The pair began the day trading at 0.9964. The USD/CAD climbed as high as 0.9973 before falling back to 0.9980. The opening day price for the pair was at 0.9812.

The AUD/USD has found support at the January low of 0.9800. A breach below this level could spur further selling of the pair to the November low at 0.9530. Resistance comes in at 0.9970. For the USD/CAD, resistance is found at today’s high of 0.9973 followed by the January high at 1.0060. Support is located at 0.9800.

The USD/JPY was trading near its lows for the day at 80.85 after opening at 81.44. The pair should continue to move lower towards the October low at 80.20. Resistance is yesterday’s high at 82.40.

Frightened traders looked for safe haven assets during the European trading session and moved into long dollar and long yen positions as an intensifying situation in Japan has risk aversion at a peak for the year. Global bourses were lower across the board with the Nikkei 225 falling 10.55%. The FTSE was down 2.28%. At the opening of the New York trading session the Dow Jones Industrials Average was down 2.3%.

Driving the indices and the currencies lower are fears of a nuclear accident in three Japanese power plants damaged in the tsunami. Also pushing the yen to new highs are increased expected costs from the cleanup. Due to the Japanese crisis, traders are shifting their interest rate expectations in developed nations as central banks may begin to tone down their hawkish rhetoric.

At this stage today’s US interest rate announcement seems to be a minor event on the economic calendar as the Fed is not expected to change its current position on the US economic recovery or US interest rate expectations.

A third explosion occurred at the troubled nuclear complex in Japan, causing radioactive substances to be emitted from the facility and radiation levels outside the facility to jump to more than eight times permitted levels, Tokyo Electric Power officials said. In a nationally televised statement, Prime Minister Naoto Kan said radiation has spread from the four stricken reactors of the Fukushima Dai-ichi nuclear plant along Japan’s northeastern coast. The region was shattered by Friday’s 9.0-magnitude earthquake and the ensuing tsunami that is believed to have killed more than 10,000 people, plunged millions into misery and pummeled the world’s third-largest economy.

Good Morning. It’s Tuesday, March 15, 2011. At this hour, U.S. equity futures are down. Overseas, the Asian markets retreated, while the European markets are lower. Hewlett-Packard (HPQ) raised its quarterly dividend 50% to 12c per share. Hewlett-Packard to build webOS into a leading connectivity platform…FTI Consulting (FCN) expects to acquire from LECG (XPRT) the majority of its remaining European operations…Dole Food (DOLE) sees more normal earnings in FY11.

By GCI Forex Research

FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400)

USD

Markets turned severely risk-averse during the Asia session amid reports that another explosion at a malfunctioning nuclear power facility may have ruptured the reactor’s outer protective casing, allowing much larger quantities of radioactive material to escape. Prime Minister Kan declared that “substantial amounts of radiation are leaking in the area” and that “we are making utmost efforts to prevent further explosions or the release of radioactive materials”. The Nikkei-225 went into freefall and dropped 14% at one point. EURUSD traded 1.3893-1.4003, USDJPY 81.23-82.01. Although USDJPY was relatively stable, AUDJPY and NZDJPY fell sharply. Stock indices and equity futures also weakened worldwide and UST yields were 14bp lower at one point. Overnight developments also affected central bank tightening expectations: at one point the OIS market was pricing in a 50% chance of a cut at the RBA’s upcoming April meeting. This had nothing to do with the content of the RBA’s March minutes which were also released overnight and were largely unremarkable. From here, we expect the performance of global stock markets today will play a key role in dictating short term FX direction.

EUR

ECB Governing Council member Bini-Smaghi continued to signal an imminent hike in interest rates. He said the ECB “needs to be ready to react immediately to prevent any increase in inflation expectations”. He also reminded his audience that the ECB has “indicated to markets that they should prepare for a re-normalisation of interest rates.”
The latest meeting of Eurozone finance ministers provided no further detail on proposed changes to Europe’s financial rescue facilities. However, Eurogroup Chairman Juncker said he expects more detail will emerge next Monday on the design of the ESM (the proposed successor to the current ?440 bn EFSF).
Portugal’s Prime Minister Socrates repeated his opposition to Portugal accepting external financial assistance. He said the government would meet its fiscal targets whatever the economic conditions.
Fitch said that decisions announced at the weekend materially enhance Europe’s policy response to the sovereign debt crisis, yet do not resolve concerns over the solvency of some highly indebted Eurozone countries.
Ireland’s new Finance Minister Noonan said there is no way Ireland will agree to raise its corporate tax rate in exchange for a lower interest rate on rescue loans advanced through the EFSF.

JPY

Moody’s said it is “very unlikely” that the earthquake would affect Japan’s rating. However, while noting that Japan can still fund fiscal deficits at exceptionally low cost, Moody’s said the quake may have hastened the point at which investors lose confidence in the public finances.
Finance Minister Noda pledged to keep monitoring markets and to take appropriate steps at the appropriate time.
Noda also announced plans for a supplementary budget to help deal with the aftermath of the earthquake. He said the size of the budget would likely exceed that announced at the time of the 1995 Kobe earthquake, but that his first approach would be to deploy funds held in reserve as part of the budget for the current fiscal year.

GBP

Sterling was boosted when Fitch affirmed the UK’s AAA rating, outlook stable, noting that the risks to the rating are reduced by a strong and credible fiscal consolidation program. Fitch also expressed concern that higher oil prices may result in faster interest rate hikes than are currently being assumed.

TECHNICAL OUTLOOK
EURJPY 111.96 key support.
EURUSD BULLISH Upside potential stalled in front of 1.4000/36 resistance area; a break here would expose 1.4086. Near-term support lies at 1.3752.
USDJPY BEARISH Initial resistance defined at 83.30; while support at 80.62 holds, move below this level would open way towards key low at 80.22.
GBPUSD NEUTRAL Resistance is at 1.6200, while support lies at 1.5977/64 area.
USDCHF BEARISH Bearish pressure holds above 0.9236/00 support zone, move below this would expose 0.8951. Initial resistance is at 0.9369 ahead of 0.9421.
AUDUSD BEARISH Break below 0.9944 triggers the bear trend, next support lies at 0.9867. Initial resistance at 1.0107 intraday high.
USDCAD NEUTRAL Recovery through 0.9803 renders the model neutral with next resistance at 0.9902. Support defined at 0.9735 intraday low.
EURCHF NEUTRAL 1.3040 and 1.2827 mark the near-term directional triggers.
EURGBP BULLISH Outlook remains bullish; focus is on through 0.8692 ahead of 0.8777. Near-term support is at 0.8590.
EURJPY NEUTRAL While 111.96 marks the key support, resistance lies at 116.00.

Forex Daily Market Commentary provided by GCI Financial Ltd.

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