Stock Market Correction Inspires USD Gains
Last week’s currency trading review
The Dollar was very strong as stock markets continued to fall in response to China/Obama/Greece concerns. Safe haven flows were already helping lift the USD against most pairs before Friday’s GDP report sent the Greenback to multi-month highs. Q4 GDP at 5.7% vs. 4.6% forecast q/q annualized added to the argument that the US will lead Europe out of the recovery. The FOMC statement stayed broadly the same after holding at 0.25% but the real excitement was one member dissenting from holding rates low for an extended period of time. The Euro broke through the key Psychological level of 1.4000 as Greece Bonds CDS soared on concern the nation may need to be bailed out. Uncertainty and general risk aversion sent the single currency lower against all its major partners. German IFO showed some improvement to 95.8 vs. 95.2 previously. The EUR/USD fell -1.98% closing at 1.3863, after opening the week at 1.4137.
The Japanese Yen was well supported on safe haven flows but lost ground on Friday against the USD as strong data sent US bond yields higher. Traders are wary of further Yen gains as comments from the BOJ may lean towards intervention, especially if the speed of such moves is deemed unstable. BOJ held at 0.1% with a slight improvement in the economic outlook although deflation remains a major point of concern. The USD/JPY gained 0.50% closing at 90.27 after opening the week at 89.81. The GBP was holding up well until S& P downgraded the UK banking sector and EUR/GBP selling reversed on Friday. Adding the Bearish outlook was the Q4 UK GDP growth which was anemic at 0.1% vs. 0.4% forecast. GBP/USD fell -0.82% closing at 1.5980 after opening at 1.6111. The AUD was one of the weakest currencies in play last week as the risk sensitive currency was sold across the board. The Aussie has been well supported for many months and the positioning is such that heavy losses can not be discounted if everyone leaves for the door at once. The AUD/USD fell -1.94% closing at 0.8833 after opening at 0.9004.
The forex trading week preview
In the States on Monday, January ISM manufacturing is forecast at 55.2 vs. 55.9 previously. On Tuesday, Pending Home Sales are forecast at 1.1% vs. -16% previously. On Wednesday ISM non manufacturing is forecast at 50.9 vs. 50.1 previously. On Thursday, Weekly Jobless Claims are forecast at 454k vs. 470k previously. Also released, December Factory Orders forecast at 0.6% vs. 1.1% previously. On Friday, January NonFarm Payrolls forecast at 13k vs. -85k previously. January Unemployment Rate is forecast unchanged at 10.0%. We will provide our previews and reviews of these data releases in the daily summary.
In the Eurozone On Monday, January PMI manufacturing is forecast at 52. On Tuesday, December German Retail Sales are forecast at -2.5% vs. -2.8% y/y previously. On Wednesday, January PMI services are forecast unchanged at 52.3. December EU Retail forecast at 0.4% vs. -1.2% m/m. On Thursday, German December Factory Orders are forecast 0.0% vs. 2.8% previously. Also, ECB President Trichet speaks. On Friday. German Industrial Production is forecast at 0.5% vs. 0.7% previously. In the UK On Monday, January PMI Manufacturing is forecast at 54.0 vs. 54.1 previously. On Wednesday, Jan PMI services forecast at 56.5 vs. 56.8 previously. On Thursday, BOE rate decision forecast to hold at 0.5% with the Asset Purchase program remaining at 200bn. We will provide our previews and reviews of these data releases in the daily summary.
In Japan no major data released this week. In Australia On Tuesday, RBA Rate Decision forecast to hike 0.25% to 4.0% from 3.75% previously. On Wednesday, December Trade Balance forecast at -2.4bn vs. -1.7bn previously. On Thursday, December Retail Sales are forecast at 0.2% vs. 1.4% 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 |
1.3749 |
1.3833 |
1.3865 |
1.4053 |
1.4097 |
|
USD/JPY |
88.97 |
89.14 |
90.20 |
90.92 |
91.88 |
|
GBP/USD |
1.5833 |
1.5897 |
1.5960 |
1.5982 |
1.6000 |
|
AUD/USD |
0.8783 |
0.8820 |
0.8830 |
0.9048 |
0.9093 |
|
XAU/USD |
1070.00 |
1074 |
1081.00 |
1104 |
1117.00 |
|
OIL/USD |
70.00 |
72.50 |
72.80 |
74.00 |
75.00 |
Euro – 1.3865
Initial support at 1.3833 (Jul 8 low) followed by 1.3749 (Jun 16 low). Initial resistance is now located at 1.4053 (Jan 28 high) followed by 1.4097 (Dec 27 high)
Yen – 90.20
Initial support is located at 89.14 (Jan 27 low) followed by 88.97 (Dec 18 low). Initial resistance is now at 90.92 (Jan 22 high) followed by 91.87 (Jan 21 high).
Pound – 1.5960
Initial support at 1.5897 (Jan 7 low) followed by 1.5833 (Jan 30 low). Initial resistance is now at 1.5982 (Jan 29 low) followed by 1.6000 (Big Figure).
Australian Dollar – 0.8830
Initial support at 0.8820 (Dec 25 low) followed by the 0.8783 (Dec 24 low). Initial resistance is now at 0.9048 (Jan 28 high) followed by 0.9093 (Jan 25 high).
Gold – 1081
Initial support at 1074 (Dec 22 low) followed by 1070 (Oct 14 low). Initial resistance is now at 1104 (Jan 25 high) followed by 1117 (Jan 21 high).
Oil – 72.80
Initial support at 72.50 (Intraday support) followed by 70.00 (Intraday Support). Initial resistance is now at 74.00 (Intraday Resistance) followed by 75.00 (Intraday Resistance).
