‘Risk Off’ Supports Dollar Gains
Last week’s currency trading review
The Dollar gained against all the major trading currencies except the Yen as the stockmarket correction accelerated. Weaker than expected January NonFarm Employment Change at -20k vs. +10k forecast helped the Dow Jones Index Trade under the Key 10000 level. Most of the risk aversion stemmed however from the uncertainty around Eurozone Debt as concerns spread from Greece onto Spain and Portugal. The Euro experienced bouts of heavy selling as the longer term outlook of the European Union came into question as certain member states struggled to meet Government Debt requirements. The ECB held at 1.0% and in the post announcement press conference President Trichet failed to install confidence in the Eurozone. The EUR/USD fell -1.98% closing at 1.3676, after opening the week at 1.3862.
The Japanese Yen made large gains across the board as USD/JPY broke down through the key 90 level as risk aversion spiked higher. Crosses were also under heavy pressure with EUR/JPY falling to falling to 8 month lows near Y122. GBP/JPY and AUD/JPY also fell over 3% each as carry trades was forced to liquidate. The USD/JPY fell -1.17% closing at 89.23 after opening the week at 90.27. The GBP as investors focused on government debt the Pound came under heavy selling pressure due to the weakening state of UK finances. Also hurting the pair was the weekly close below the key 1.6000 level and break of Y140 on the GBP/JPY. The BoE held rates at 0.5% and kept the Asset Purchase Facility at 200bn. GBP/USD fell -2.15% closing at 1.5640 after opening at 1.5978. The AUD was hurt as longs capitulated and the AUD/USD fell to fresh 4 month lows. The big surprise in the market was the RBA holding rates at 3.75% with the majority expecting a 0.25% hike. The RBA did seem somewhat justified though as December retail sales fell -0.7% vs. -0.2% forecast. The AUD/USD fell -1.94% closing at 0.8683 after opening at 0.8836.
The forex trading week preview
In the States On Wednesday, Fed Chief Bernanke testifies before the house financial services committee. Also December Trade Balance is forecast at -35.5bn vs. -36.4bn previously. On Thursday, January Retail Sales is forecast at 0.4% vs. -0.2%. Also released, Weekly Jobless Claims are forecast at 465k vs. 480k. On Friday, UoM Consumer Confidence is forecast at 75 vs 74.4 previously. We will provide our previews and reviews of these data releases in the daily summary.
In the Eurozone On Tuesday, German January CPI is forecast at 0.8% whilst January’s Trade Balance is forecast at 14.6bn vs. 17.4bn previously. On Friday, Q4 German GDP is forecast at 0.2% vs. 0.7% previously. Also released, Q4 EU GDP forecast at 0.3% vs. 0.4%. In the UK On Tuesday, December Trade Balance is forecast at -6.6bn vs. -6.7bn previously. On Wednesday, December Industrial Production is forecast at 0.2% vs. 0.4% previously. Also released, BOE Quarterly Inflation Report. We will provide our previews and reviews of these data releases in the daily summary.
In Japan On Wednesday, December Machine Orders is forecast at 8% vs. -11.3% previously. In Australia On Thursday, January Unemployment Rate is forecast at 5.6% vs. 5.5% previously. January Employment Change is forecast at 15k vs. 35k previously. We will provide our previews and reviews of these data releases in the daily summary.
TECHNICAL COMMENTARY
|
Currency |
Sup 2 |
Sup 1 |
Spot |
Res 1 |
Res 2 |
|
EUR/USD |
1.3531 |
1.3584 |
1.3645 |
1.3903 |
1.4026 |
|
USD/JPY |
88.20 |
88.56 |
89.30 |
89.79 |
90.55 |
|
GBP/USD |
1.5450 |
1.5517 |
1.5600 |
1.5919 |
1.6069 |
|
AUD/USD |
0.8570 |
0.8608 |
0.8665 |
0.8778 |
0.8883 |
|
XAU/USD |
1035.00 |
1041 |
1067.00 |
1073 |
1111.00 |
|
OIL/USD |
69.50 |
70.00 |
71.70 |
72.50 |
75.00 |
Euro – 1.3645
Initial support at 1.3584 (May 20 low) followed by 1.3531 (May 19 low). Initial resistance is now located at 1.3903 (Feb 4 high) followed by 1.4026 (Feb 3 high)
Yen – 89.30
Initial support is located at 88.56 (Feb 4 low) followed by 88.20 (Dec 11 low). Initial resistance is now at 89.79 (0.236 of 93.77-88.56) followed by 90.55 (0.382 of 93.77-88.56).
Pound – 1.5600
Initial support at 1.5517 (May 17 low) followed by 1.5450 (May 20 low). Initial resistance is now at 1.5918 (Feb 4) followed by 1.6069 (Feb 3 high).
Australian Dollar – 0.8665
Initial support at 0.8608 (Feb 4 low) followed by the 0.8570 (Oct 2 low). Initial resistance is now at 0.8778 (0.382 of 0.9328-0.8608) followed by 0.8883 (0.382 of 0.9328-0.8608).
Gold – 1067
Initial support at 1041 (Nov 2 low) followed by 1035 (Oct 30 low). Initial resistance is now at 1073 (Jan 28 low) followed by 1111 (Feb 4 high).
Oil – 71.70
Initial support at 70.00 (Intraday Support) followed by 69.50 (Intraday Support). Initial resistance is now at 72.50 (Intraday Resistance) followed by 75.00 (Intraday Resistance).
