EUR/USD
Further gains for the euro are expected towards the Feb. 2 reaction high at 1.3862. The wave equality target at 1.3824 has been keeping the underlying tone positive and the 1.3862 peak marks the highest point of a recently completed bull flag/wedge pattern on the daily chart. The positive wave structure of the strong recovery off Tuesday's 1.3525 low creates scope for the 1.4000 area in the coming sessions. Corrective downside risk is limited to Thursday's low at 1.3704.
GBP/USD
Thursday's failure to force a break through the key 1.6277/1.6298 resistance area will concern GBP bulls. Action since the Feb. 3 reaction high at 1.6277 can be confined within a bullish continuation pattern, although this means there would be scope for a return to the Feb. 11 reaction low at 1.5964 on a break below 1.6075. Regaining ground above 1.6211 is required to bring the focus back onto the 1.6277/1.6298 resistance area.
USD/JPY
The corrective recovery off 81.62 is likely to be short-lived and limited to the 82.50 area. Resistance at 82.32 will look to protect 82.50 and prompt a return to the 81.62 low, which is close to crucial support at 81.50. The support line of an effective four-month bear pennant consolidation pattern lies at 81.50, which is protecting the Feb. 4 reaction low at 81.10.
AUD/USD
Extends the recovery off Wednesday's low at 0.9982 to bring the focus back onto the Feb. 18 high at 1.0160. A three-week bull pennant continuation pattern can be discerned on the daily chart and to provide a short-term boost, a break through 1.0160 would create scope for 1.0201 and the Dec. 31 reaction high at 1.0258. Good support lies in the 1.0060 area and only forays below there would concern bulls.
FOREX FOCUS
Watching the euro is like watching a rabbit caught in the glare of the headlights as stagflation comes rumbling down the road. The single currency just isn't sure which way to hop. On one side, the European Central Bank is well placed to respond to higher inflation. As analysts point out, the ECB can tighten monetary policy much more quickly than the Federal Reserve, which is mired in heavy doses of quantitative easing that will take months to unwind. On the other side of the road, however, is the problem of growth. Not only would higher rates increase the risk of a sovereign default but civil unrest, of the type seen in Greece this week, would become more widespread. Stagflation has started to loom large as the price of crude oil has rocketed on fears that the "Jasmine revolution" sweeping the Middle East and North Africa will disrupt production. Libyan output has already been impacted, helping to send the price of Brent crude to nearly $120 a barrel earlier Thursday. And the rally in crude prices isn't expected to stop here. Demonstrations in Bahrain and Saudi Arabia will only increase geopolitical tensions and raise fears of an even greater oil shock. A study by Goldman Sachs highlights the risk of disruption to Europe's gas supply from North Africa and the impact this would have on wholesale power prices, especially in Italy, Spain, Portugal and the U.K. As for most other major economies, this couldn't have come at a worse time for euro-zone and European Central Bank policy makers. Not only is growth in most parts of the region still very fragile, but Germany, the strongest of the core countries, would be most exposed to higher energy costs. Carsten Brzeski, senior euro-zone economist with ING Financial Markets in Brussels, summed up the problem for Germany: "The biggest threat for the German economy currently comes from oil prices. Energy- and food-driven inflation could choke off the consumption recovery before it actually gets going."
EUROPE
Sterling came under pressure across the board Friday after data showed that the U.K. economy had contracted more than previously thought in the fourth quarter, while the euro also sank despite a general improvement in global risk appetite and retreating oil prices. Data showed that the U.K. economy shrank by 0.6% in the last quarter of 2010, compared with an initially estimated quarterly drop of 0.5% in late January, pushing the pound lower against the dollar and scaling back expectations of three rate increases by the Bank of England this year. Rate analysts now predict only two BOE rate increases in 2011, with the third one pushed forward to February 2012. "Today's figures show that the performance of the economy was even worse than we initially feared," said Hetal Mehta, a U.K. economist at Daiwa Securities in London, adding that expectations for a rate rise in May will be influenced by first-quarter 2011 GDP figures. "Only if the economy expands by around 0.6%-0.7%, to take GDP back to third-quarter levels, do we think that the MPC [BOE Monetary Policy Committee] would consider a May rate hike. In our view, this is an unlikely scenario," Mehta added. The euro was well bid early in the session against the safe-haven Swiss franc, as global risk sentiment improved from Thursday and oil prices eased back from over two-year highs. "The franc would suffer acutely were the markets to suddenly become more relaxed, or to become increasingly inured to the news flow regarding Libya and the like," said Daragh Maher, a currency strategist at Credit Agricole in a note to clients. The franc managed to claw back most of the day's losses, however, after a strong Swiss February KOF survey index rose to 2.18, above expectations of 2.08, giving the currency a lift. Oil prices remained in focus during the session after easing off the two-and-a-half year highs reached Thursday at $119.79 a barrel. This benefited the Australian dollar and its Canadian counterpart as well. The dollar was cautiously higher across the board, but struggled to sustain gains against the Japanese yen. The softer greenback tone wasn't helped Thursday, when the St. Louis Federal Reserve President James Bullard said that a third round of bond buying wasn't "totally off the table."
ASIA
The euro rose to its highest level against the dollar in more than three weeks in Asia Friday, as investors bet the European Central Bank may sound a more hawkish tone at a meeting next week amid mounting inflation expectations. Dealers said investors will be watching Germany's provisional consumer price index data for February due later in the day, as well as other European economic indicators. Strong results would likely buoy the euro further by increasing expectations for the ECB to move toward an exit from its easy monetary policy in the nearer term, they said. The common currency is also benefiting from the perception it has less to lose than the dollar from the turmoil in the Middle East and North Africa, dealers said. The U.S. is perceived as the major outside backer of governments in the oil-rich region that are being challenged by rapidly spreading popular protests. Washington has been put on the defensive, dealers say. Speculation that future governments in countries like Egypt could be less accommodative to U.S. interests highlights the risk of waning American power, a negative development for the greenback, they say. "Dollar assets are looking riskier due to the turbulence in the Mideast and North Africa," said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corporation. "The developments there add to the view that U.S. power is waning." Continued speculation that any intensification of anti-government protests in Saudi Arabia and other oil-rich Middle Eastern nations could send oil prices higher is also hurting the dollar while benefiting the euro, dealers said. While the higher oil prices threaten to cool the U.S. economy, "the effect in the euro-zone is more noticeably to raise inflation expectations, which makes it seem all the more certain that the ECB will raise interest rates before the Federal Reserve," said Hideki Amikura, a deputy general manager in the foreign exchange section of Nomura Trust and Banking.
WORLD
The dollar fell broadly Thursday in New York as traders opted for the safety of the Swiss franc and Japan's yen amid ongoing turmoil in the Middle East and North Africa. Meanwhile, expectations for widening interest-rate differentials pushed the euro to a three-week high against the dollar. The dollar sank to a record low against the franc of CHF0.9234 as violence increased in Libya and fears increased that unrest in the Middle East could spread to more oil-producing nations like Iran and Saudi Arabia. "We continue to focus on the issues in the Middle East," said Aroop Chatterjee, chief foreign exchange quantitative strategist at Barclays Capital in New York. "Even though we've seen a bit of stabilization in oil prices, in the currencies market, [investors] still favor safe havens." The franc has become the most popular safe-haven option during times of geopolitical risk. It also rallied against the euro Thursday. The yen also was bid higher against the dollar and euro thanks to its perceived safety. Oil prices climbed above $100 a barrel early in the global day on the New York Mercantile Exchange, leading to the dollar's record weakness against the franc. But even as oil prices have backed off that lofty level, currency investors continued to favor safety. The situation in the Middle East appears to be far from stabilizing, so the flight to safety is likely to continue, analysts said. "If Iran or Saudi Arabia become unglued, it could get much worse," said John McCarthy, managing director of foreign exchange for ING Capital Markets in New York. There have been protests in recent days in both Saudi Arabia and Iran, but nothing approaching the levels seen in recent days in Libya. A bigger disruption in oil supply could severely hinder global economic growth. Libya accounts for about 2% of the world's oil production, while Iran accounts for about 5% and Saudi Arabia nearly 12%
Minggu, 27 Februari 2011
Rabu, 09 Februari 2011
FOREX INTRADAY SNAPSHOT
EUR/USD
Stages a recovery off 1.3508 in an attempt to regain a foothold above 1.3600. The top of the weekly Ichimoku cloud halted the dominant setback off the Feb. 2 reaction high at 1.3862, but layers of resistance between 1.3685 and 1.3725 provide a significant hurdle for corrective gains. A break below 1.3573 is required to bring the 1.3508 low back into the picture.
GBP/USD
Monday's high at 1.6185 is expected to face a retest, as last Friday's bear failure low at 1.6037 continues to control near-term sentiment. A break through 1.6185 would re-open lat week's 1.6277 reaction high and the key November reaction high at 1.6298 is still vulnerable. Only a reversal below 1.6037 would put bears in control of the near-term, exposing 1.5990 initially, but creating room for 1.5940 and a sharper setback to 1.5826.
USD/JPY
Consolidates last Friday's strong recovery off 81.10 within a rectangle between 82.16 and 82.48. More ranging is expected, but with solid backup support lying at 81.85, the main threat is to the upside. A push through 82.48 would create room for projected resistance at 82.85, which protects the Jan. 27 high at 83.22.
AUD/USD
Recovers well to re-open last Friday's spinning top high at 1.0201. Monday's recovery off 1.0098 left a neutralizing doji on the daily chart and a break through 1.0201 is the main threat, opening the December 2010 28-year high at 1.0258. Only a break below 1.0116 would negate the positive outlook, exposing 1.0098 and 1.0055.
FOREX FOCUS
Fear is still stalking the currency markets. Egyptian rioters may have calmed down and Europe's leaders may be edging closer to resolving the euro zone's sovereign-debt crisis. But it is the risk of global inflation that now appears to be the problem. This seems to be the message coming from the currency market's muted response to Friday's sharp rise in U.S. Treasury yields. The rise, which took the 10-year yield to a 10-month high at 3.68%, came in the wake of a sharp fall in the U.S. unemployment rate to 9.0% from 9.4%. Under normal circumstances, the yield rally should have given the dollar a sharp boost, not only against the euro, but also against the yen, the value of which against the dollar is often driven by yield differentials. However, very little has happened. The dollar has risen but gains have been limited and there is little sign of any serious upward momentum developing. Some market experts suggest that the rise in yields will only have an impact on sentiment once the focus of the currency markets moves away from local events, such as those in Egypt. Others reckon that the dollar hasn't benefited more as there is little evidence that the higher yields will translate into higher interest rates from the Fed. For example, Jane Foley, senior currency strategist at Rabobank in London, reckons that the timetable for rate hikes is hardly changed, with the European Central Bank expected to move in October or November but the Fed still seen waiting until 2012. But it could well be that inflation fears are merely replacing the sovereign-debt crisis and the Middle East contagion risks that have largely dictated market sentiment in recent weeks.
EUROPE
China throws a curve ball in London trading hours and raises its interest rates, hitting risk-sensitive commodity currencies hard. But the move fails to have more than a temporary effect on the euro's rally against the dollar, with the single currency jumping to the day's high against the dollar at $1.3670 after a dip immediately following the news. AUD was worst hit, dropping to $1.0139 from $1.0180 in the wake of the announcement and sinking to the day's low at $1.0140 soon afterwards. EUR/USD currently up at 1.3634, GBP/USD up at 1.6112 and USD/JPY down at 82.13.
ASIA
The euro gained against the dollar and yen in Asia Tuesday as stronger Japanese equities prompted investors to buy back the risk-sensitive currency, pushing it further off the two-week low against the greenback that it marked Monday in New York. Highlighting investors' greater willingness to bet on risk-sensitive currencies, several Asian units rose to multi-year highs against the dollar Tuesday. The euro's rise was also helped as stop-loss buying orders were triggered above $1.3600, dealers said. But the euro's gains could be blunted later in the global day if the U.S. Treasury Department's offering of $32 billion of three-year notes goes poorly, pushing U.S. yields up further, dealers said. "If the auction outcome supports the rising trend in bond yields," that could weigh on the euro, said Yuichiro Harada, senior vice president of forex division at Mizuho Corporate Bank. Recent strength in U.S. economic data has also added to speculation "that U.S. Treasury yields will likely gain on the back of the economic recovery," which could make investors more hesitant to buy the common currency, he said. At the same time, the euro's downside against the dollar may remain limited if the currency holds above the $1.3500 mark for the rest of the global day, said Sumino Kamei, senior analyst at Bank of Tokyo-Mitsubishi UFJ. The euro was at $1.3614 as of 0450 GMT from $1.3583 late Monday in New York, and at Y112.04 from Y111.82.
WORLD
The euro rebounded from a two-week low Monday in New York, as short-term buying momentarily overcame concerns about weak German economic data and a lack of new details about the euro zone's plans to address its debt woes. European Union leaders met late last week to discuss a broad range of economic reforms, and map out a strategy to address the 17-nation currency bloc's sovereign-debt problems. But the summit dissolved into acrimony, disappointing traders who had hoped EU leaders would clarify details over plans to support the euro zone's most troubled economies. After weeks of rallying on the back of expectations of higher euro-zone interest rates, the single currency fell sharply, as the European Central Bank appeared to downplay the prospect for higher borrowing costs. Disappointment with European policymakers combined with surprisingly weak German manufacturing data for December, raising some concerns about the sustainability of a recovery in the euro zone's largest economy. At least temporarily, concerns about the euro zone's most economically distressed countries have largely retreated to the background. "The euro has been downgraded from a crisis to a problem," said Ron Leven, currency strategist at Morgan Stanley. Because the market appears to be pricing in the prospect of some resolution, "the risk of a liquidity event [appears] much smaller," he added. Late Monday, the euro was at $1.3583 from $1.3582 late Friday, according to EBS via CQG. The dollar was at Y82.32 from Y82.20, while the euro was at Y111.82 from Y111.67. The U.K. pound was at $1.6108 from about $1.6104. The dollar was at CHF0.9555 from CHF0.9551.
Stages a recovery off 1.3508 in an attempt to regain a foothold above 1.3600. The top of the weekly Ichimoku cloud halted the dominant setback off the Feb. 2 reaction high at 1.3862, but layers of resistance between 1.3685 and 1.3725 provide a significant hurdle for corrective gains. A break below 1.3573 is required to bring the 1.3508 low back into the picture.
GBP/USD
Monday's high at 1.6185 is expected to face a retest, as last Friday's bear failure low at 1.6037 continues to control near-term sentiment. A break through 1.6185 would re-open lat week's 1.6277 reaction high and the key November reaction high at 1.6298 is still vulnerable. Only a reversal below 1.6037 would put bears in control of the near-term, exposing 1.5990 initially, but creating room for 1.5940 and a sharper setback to 1.5826.
USD/JPY
Consolidates last Friday's strong recovery off 81.10 within a rectangle between 82.16 and 82.48. More ranging is expected, but with solid backup support lying at 81.85, the main threat is to the upside. A push through 82.48 would create room for projected resistance at 82.85, which protects the Jan. 27 high at 83.22.
AUD/USD
Recovers well to re-open last Friday's spinning top high at 1.0201. Monday's recovery off 1.0098 left a neutralizing doji on the daily chart and a break through 1.0201 is the main threat, opening the December 2010 28-year high at 1.0258. Only a break below 1.0116 would negate the positive outlook, exposing 1.0098 and 1.0055.
FOREX FOCUS
Fear is still stalking the currency markets. Egyptian rioters may have calmed down and Europe's leaders may be edging closer to resolving the euro zone's sovereign-debt crisis. But it is the risk of global inflation that now appears to be the problem. This seems to be the message coming from the currency market's muted response to Friday's sharp rise in U.S. Treasury yields. The rise, which took the 10-year yield to a 10-month high at 3.68%, came in the wake of a sharp fall in the U.S. unemployment rate to 9.0% from 9.4%. Under normal circumstances, the yield rally should have given the dollar a sharp boost, not only against the euro, but also against the yen, the value of which against the dollar is often driven by yield differentials. However, very little has happened. The dollar has risen but gains have been limited and there is little sign of any serious upward momentum developing. Some market experts suggest that the rise in yields will only have an impact on sentiment once the focus of the currency markets moves away from local events, such as those in Egypt. Others reckon that the dollar hasn't benefited more as there is little evidence that the higher yields will translate into higher interest rates from the Fed. For example, Jane Foley, senior currency strategist at Rabobank in London, reckons that the timetable for rate hikes is hardly changed, with the European Central Bank expected to move in October or November but the Fed still seen waiting until 2012. But it could well be that inflation fears are merely replacing the sovereign-debt crisis and the Middle East contagion risks that have largely dictated market sentiment in recent weeks.
EUROPE
China throws a curve ball in London trading hours and raises its interest rates, hitting risk-sensitive commodity currencies hard. But the move fails to have more than a temporary effect on the euro's rally against the dollar, with the single currency jumping to the day's high against the dollar at $1.3670 after a dip immediately following the news. AUD was worst hit, dropping to $1.0139 from $1.0180 in the wake of the announcement and sinking to the day's low at $1.0140 soon afterwards. EUR/USD currently up at 1.3634, GBP/USD up at 1.6112 and USD/JPY down at 82.13.
ASIA
The euro gained against the dollar and yen in Asia Tuesday as stronger Japanese equities prompted investors to buy back the risk-sensitive currency, pushing it further off the two-week low against the greenback that it marked Monday in New York. Highlighting investors' greater willingness to bet on risk-sensitive currencies, several Asian units rose to multi-year highs against the dollar Tuesday. The euro's rise was also helped as stop-loss buying orders were triggered above $1.3600, dealers said. But the euro's gains could be blunted later in the global day if the U.S. Treasury Department's offering of $32 billion of three-year notes goes poorly, pushing U.S. yields up further, dealers said. "If the auction outcome supports the rising trend in bond yields," that could weigh on the euro, said Yuichiro Harada, senior vice president of forex division at Mizuho Corporate Bank. Recent strength in U.S. economic data has also added to speculation "that U.S. Treasury yields will likely gain on the back of the economic recovery," which could make investors more hesitant to buy the common currency, he said. At the same time, the euro's downside against the dollar may remain limited if the currency holds above the $1.3500 mark for the rest of the global day, said Sumino Kamei, senior analyst at Bank of Tokyo-Mitsubishi UFJ. The euro was at $1.3614 as of 0450 GMT from $1.3583 late Monday in New York, and at Y112.04 from Y111.82.
WORLD
The euro rebounded from a two-week low Monday in New York, as short-term buying momentarily overcame concerns about weak German economic data and a lack of new details about the euro zone's plans to address its debt woes. European Union leaders met late last week to discuss a broad range of economic reforms, and map out a strategy to address the 17-nation currency bloc's sovereign-debt problems. But the summit dissolved into acrimony, disappointing traders who had hoped EU leaders would clarify details over plans to support the euro zone's most troubled economies. After weeks of rallying on the back of expectations of higher euro-zone interest rates, the single currency fell sharply, as the European Central Bank appeared to downplay the prospect for higher borrowing costs. Disappointment with European policymakers combined with surprisingly weak German manufacturing data for December, raising some concerns about the sustainability of a recovery in the euro zone's largest economy. At least temporarily, concerns about the euro zone's most economically distressed countries have largely retreated to the background. "The euro has been downgraded from a crisis to a problem," said Ron Leven, currency strategist at Morgan Stanley. Because the market appears to be pricing in the prospect of some resolution, "the risk of a liquidity event [appears] much smaller," he added. Late Monday, the euro was at $1.3583 from $1.3582 late Friday, according to EBS via CQG. The dollar was at Y82.32 from Y82.20, while the euro was at Y111.82 from Y111.67. The U.K. pound was at $1.6108 from about $1.6104. The dollar was at CHF0.9555 from CHF0.9551.
Senin, 07 Februari 2011
FOREX INTRADAY SNAPSHOT
EUR/USD
The corrective recovery off 1.3543 is likely to stall and renewed bear pressure is expected on Friday's 1.3543 low. Last week's gravestone doji candle is behind the latest downside threat and support from the top of the weekly Ichimoku cloud at 1.3510 is likely to be called into action. The 38.2% Fibonacci retracement level of the 1.2860/1.3862 rally lies just beneath, at 1.3479. Only a break above Friday's spike high at 1.3680 would put bulls in control of the near-term, opening 1.3700 and 1.3770.
GBP/USD
The recovery off Friday's low at 1.6037 is set to extend toward 1.6172. The 1.6037 low has already become a potential bear failure low and a break through 1.6172 would provide confirmation, creating room for a recovery back toward last week's 1.6277 reaction high. Only a reversal below 1.6037 would put bears in control of the near-term, exposing 1.5990.
USD/JPY
Friday's strong recovery off 81.10 keeps the three-month bear pennant intact and consolidation is underway off 82.47. More downside consolidation is expected toward the 81.85 area, which would be exposed on a break below 82.16. A recovery above 82.28 re-open the 82.47 high, but only a break through 82.47 would suggest this recovery is sustainable.
AUD/USD
Suffers a corrective setback off Friday's spinning top high at 1.0201, which has scope for the 1.0050 area. A break below 1.0098 would bring the 1.0050 support area into focus, but the positive weekly candle suggests downside risk is limited. A push through resistance at 1.0163 would be required to re-open the 1.0201 high and threaten a return to the December 2010 28-year high at 1.0258.
FOREX FOCUS
Kate Barker is right. The Bank of England's credibility is very much at stake, especially if U.K. inflation does not fall back as Governor Mervyn King has promised. The central bank risks unleashing a price surge that could seriously damage the recovery down the line. However, as Barker admitted in her speech Thursday, the central bank's dilemma is worse now than it was when she left the monetary policy committee last May. The Bank of England is not alone. This week we have also seen the European Central Bank turning more dovish than expected and the Federal Reserve turning a tad more hawkish than anticipated. Each bank faces its own particular policy challenges, but for all three one issue is key: managing their currencies. Sure, the dollar, the euro and the pound are all free-floaters but that doesn't mean that the economies of the U.S., the euro zone and the U.K. are any less sensitive to currency moves and their central banks any less partial to a bit of subtle currency management. Over the last year or two, the U.S. has come under repeated attack, especially from China, for allowing the dollar to remain weak, undermined by the Fed's extensive program of quantitative easing. Now, as signs emerge that the U.S. recovery is becoming more entrenched and the jobs market is showing signs of improvement, Fed Chairman Ben Bernanke has been able to feed the market a little more optimism. Hopes have risen that more QE may not be needed and the dollar has shown more resilience.
EUROPE
The dollar recovered some ground in European trading hours Monday while sentiment towards the euro soured rapidly after weak German manufacturing orders data. The euro hit a fresh two-week low against the dollar and was under pressure against the pound after German manufacturing orders fell 3.4% in December, a worse-than-expected drop, driven by a shortage of large orders and low demand for new vehicles, the economics ministry said Monday. Moreover, the fact that European Union leaders failed to make any progress in talks Friday over a German-led plan to boost the competitiveness of weaker euro-zone economies, may also be weighing on sentiment towards the 17-country currency, market participants said. "The EU summit failed to deliver any real progress, in fact it was actually quite negative," said Ian Stannard, a currency strategist at BNP Paribas in London. "The differences of opinion were very much exposed by the summit," he added. A large majority of European Union leaders rebuffed a Franco-German plan for reforming the euro-zone economy outlined at Friday's summit. "The fact that the European Union competitiveness pact seems to be failing to gain any interest elsewhere is going to hold up negotiations on the European Financial Stability Facility," said BNP's Stannard. To a large extent, market participants were expecting an agreement to increase the EFSF's lending capacity at the end of March. Looking to the session ahead Monday, with no major data due for release, European Central Bank President Jean-Claude Trichet's appearance before the European Parliament Committee at 1400 GMT will be closely watched.
ASIA
The euro rose against the yen and the dollar in Asia Monday as generally stronger regional equities encouraged buying of the risk-sensitive common currency, which also benefited from bargain hunting following falls in New York on Friday. For the rest of the global day, traders will be watching European Central Bank President Jean-Claude Trichet's appearance before the European Parliament Committee at 1400 GMT. Trichet last week cut into the euro's recent rises by expressing support for interest rates to stay at current levels. Any further dovish comments could damp the common currency's modest rise so far Monday, dealers said. Other downside risks also lurk for the euro in industrial production data from the euro-zone powerhouse economies this week, dealers and analysts said. Germany releases its industrial production index for December on Tuesday, followed by France on Thursday. "We believe the market will react more severely" to any downside surprises in the euro-zone industrial output data, said Sara Yates, a currency strategist with Barclays Capital. Investors have become more cautious following the sell-off in the common currency late last week, and that is "likely to inhibit the market's eagerness" to get more solidly behind the euro this week, even if the data are strong, she said. At 0450 GMT, the euro was up at Y111.95 from Y111.67 late Friday in New York. Against the dollar, the common currency traded up at $1.3616 from $1.3582. Higher share prices in Japan, where the benchmark Nikkei Stock Average traded up 0.64% in afternoon trade, cued short-term investors to buy the risk-sensitive currency, dealers said.
WORLD
The dollar advanced broadly Friday in New York, as initial disappointment with a seemingly weak U.S. employment report gave way to guarded optimism that sluggish labor markets could be poised to rebound. The Labor Department reported that the U.S. economy added a paltry 36,000 jobs, far less than the consensus estimates of 136,000. However, economists were surprised by the unemployment rate, which posted an unexpected drop to 9.0% from 9.4%. After expecting a more-robust jobs number, traders initially jettisoned the dollar in disappointment. They soon bought it back after analysts attributed much of the jobs weakness was to the heavy snowfall that blanketed much of U.S. last month. That kept potential employees in hibernation. "Over the last year, we've added a million jobs, and it takes a long time to eat into the 8 million jobs lost during the recession," said Brian Levitt, economist with OppenheimerFunds Inc. "It's a slightly disappointing report, but it can be explained away due to a very harsh January weather-wise." Friday's jobs data are unlikely to prompt the Federal Reserve to curb its ultra-loose monetary policy, which would help buttress the dollar. However, expectations about a potential interest-rate increase from the bloc of euro-zone nations were decisively squelched by the European Central Bank this week, which deprived the euro of much of its support.
The corrective recovery off 1.3543 is likely to stall and renewed bear pressure is expected on Friday's 1.3543 low. Last week's gravestone doji candle is behind the latest downside threat and support from the top of the weekly Ichimoku cloud at 1.3510 is likely to be called into action. The 38.2% Fibonacci retracement level of the 1.2860/1.3862 rally lies just beneath, at 1.3479. Only a break above Friday's spike high at 1.3680 would put bulls in control of the near-term, opening 1.3700 and 1.3770.
GBP/USD
The recovery off Friday's low at 1.6037 is set to extend toward 1.6172. The 1.6037 low has already become a potential bear failure low and a break through 1.6172 would provide confirmation, creating room for a recovery back toward last week's 1.6277 reaction high. Only a reversal below 1.6037 would put bears in control of the near-term, exposing 1.5990.
USD/JPY
Friday's strong recovery off 81.10 keeps the three-month bear pennant intact and consolidation is underway off 82.47. More downside consolidation is expected toward the 81.85 area, which would be exposed on a break below 82.16. A recovery above 82.28 re-open the 82.47 high, but only a break through 82.47 would suggest this recovery is sustainable.
AUD/USD
Suffers a corrective setback off Friday's spinning top high at 1.0201, which has scope for the 1.0050 area. A break below 1.0098 would bring the 1.0050 support area into focus, but the positive weekly candle suggests downside risk is limited. A push through resistance at 1.0163 would be required to re-open the 1.0201 high and threaten a return to the December 2010 28-year high at 1.0258.
FOREX FOCUS
Kate Barker is right. The Bank of England's credibility is very much at stake, especially if U.K. inflation does not fall back as Governor Mervyn King has promised. The central bank risks unleashing a price surge that could seriously damage the recovery down the line. However, as Barker admitted in her speech Thursday, the central bank's dilemma is worse now than it was when she left the monetary policy committee last May. The Bank of England is not alone. This week we have also seen the European Central Bank turning more dovish than expected and the Federal Reserve turning a tad more hawkish than anticipated. Each bank faces its own particular policy challenges, but for all three one issue is key: managing their currencies. Sure, the dollar, the euro and the pound are all free-floaters but that doesn't mean that the economies of the U.S., the euro zone and the U.K. are any less sensitive to currency moves and their central banks any less partial to a bit of subtle currency management. Over the last year or two, the U.S. has come under repeated attack, especially from China, for allowing the dollar to remain weak, undermined by the Fed's extensive program of quantitative easing. Now, as signs emerge that the U.S. recovery is becoming more entrenched and the jobs market is showing signs of improvement, Fed Chairman Ben Bernanke has been able to feed the market a little more optimism. Hopes have risen that more QE may not be needed and the dollar has shown more resilience.
EUROPE
The dollar recovered some ground in European trading hours Monday while sentiment towards the euro soured rapidly after weak German manufacturing orders data. The euro hit a fresh two-week low against the dollar and was under pressure against the pound after German manufacturing orders fell 3.4% in December, a worse-than-expected drop, driven by a shortage of large orders and low demand for new vehicles, the economics ministry said Monday. Moreover, the fact that European Union leaders failed to make any progress in talks Friday over a German-led plan to boost the competitiveness of weaker euro-zone economies, may also be weighing on sentiment towards the 17-country currency, market participants said. "The EU summit failed to deliver any real progress, in fact it was actually quite negative," said Ian Stannard, a currency strategist at BNP Paribas in London. "The differences of opinion were very much exposed by the summit," he added. A large majority of European Union leaders rebuffed a Franco-German plan for reforming the euro-zone economy outlined at Friday's summit. "The fact that the European Union competitiveness pact seems to be failing to gain any interest elsewhere is going to hold up negotiations on the European Financial Stability Facility," said BNP's Stannard. To a large extent, market participants were expecting an agreement to increase the EFSF's lending capacity at the end of March. Looking to the session ahead Monday, with no major data due for release, European Central Bank President Jean-Claude Trichet's appearance before the European Parliament Committee at 1400 GMT will be closely watched.
ASIA
The euro rose against the yen and the dollar in Asia Monday as generally stronger regional equities encouraged buying of the risk-sensitive common currency, which also benefited from bargain hunting following falls in New York on Friday. For the rest of the global day, traders will be watching European Central Bank President Jean-Claude Trichet's appearance before the European Parliament Committee at 1400 GMT. Trichet last week cut into the euro's recent rises by expressing support for interest rates to stay at current levels. Any further dovish comments could damp the common currency's modest rise so far Monday, dealers said. Other downside risks also lurk for the euro in industrial production data from the euro-zone powerhouse economies this week, dealers and analysts said. Germany releases its industrial production index for December on Tuesday, followed by France on Thursday. "We believe the market will react more severely" to any downside surprises in the euro-zone industrial output data, said Sara Yates, a currency strategist with Barclays Capital. Investors have become more cautious following the sell-off in the common currency late last week, and that is "likely to inhibit the market's eagerness" to get more solidly behind the euro this week, even if the data are strong, she said. At 0450 GMT, the euro was up at Y111.95 from Y111.67 late Friday in New York. Against the dollar, the common currency traded up at $1.3616 from $1.3582. Higher share prices in Japan, where the benchmark Nikkei Stock Average traded up 0.64% in afternoon trade, cued short-term investors to buy the risk-sensitive currency, dealers said.
WORLD
The dollar advanced broadly Friday in New York, as initial disappointment with a seemingly weak U.S. employment report gave way to guarded optimism that sluggish labor markets could be poised to rebound. The Labor Department reported that the U.S. economy added a paltry 36,000 jobs, far less than the consensus estimates of 136,000. However, economists were surprised by the unemployment rate, which posted an unexpected drop to 9.0% from 9.4%. After expecting a more-robust jobs number, traders initially jettisoned the dollar in disappointment. They soon bought it back after analysts attributed much of the jobs weakness was to the heavy snowfall that blanketed much of U.S. last month. That kept potential employees in hibernation. "Over the last year, we've added a million jobs, and it takes a long time to eat into the 8 million jobs lost during the recession," said Brian Levitt, economist with OppenheimerFunds Inc. "It's a slightly disappointing report, but it can be explained away due to a very harsh January weather-wise." Friday's jobs data are unlikely to prompt the Federal Reserve to curb its ultra-loose monetary policy, which would help buttress the dollar. However, expectations about a potential interest-rate increase from the bloc of euro-zone nations were decisively squelched by the European Central Bank this week, which deprived the euro of much of its support.
Rabu, 02 Februari 2011
FOREX INTRADAY SNAPSHOT
EUR/USD
The powerful uptrend sets fresh two-month highs, and the next port of call above Wednesday's current session high at 1.3862 is the 1.3950 area. The 76.4% Fibonacci retracement level of the 1.4283/1.2860 bear wave lies at 1.3947, and a measured target based on the recent 190-pip consolidation range highlights 1.3950. Backup resistance lies at 1.4000. Downside risk looks limited to the 1.3750 area, but a lot of work would be required to wrest control from USD bears.
GBP/USD
The bull wave off last week's 1.5752 low is extending strongly into fresh twelve-week highs, and is closing in on the 1.6211 target. The 1.6211 level represents a 1.618 Fibonacci extension target, but the key November reaction high at 1.6298 is now looking vulnerable. Corrective weakness will attract support while above 1.6000, which is protected by 1.6075.
USD/JPY
The support line of a three-month bear pennant is being challenged at 81.31, as the robust downtrend continues to dominate. The sharpness of the decline off the Jan. 27 83.22 high creates room for a break below 81.31 this week, exposing the 2011 low at 80.93 and the bear pennant low at 80.21 from last November. Corrective gains are limited to the 81.92 area, and only above there would provide a near-term boost.
AUD/USD
Corrects off Tuesday's high at 1.0150, with downside risk limited to the 1.0045 area. This week's strong recovery off 0.9866 is likely to keep 1.0045 protected, and prompt a fresh wave of bull pressure to the 1.0150 high. Tuesday's strength also negated a three-week bear pennant, and a return to the Dec. 28-year high at 1.0258 is expected in the coming sessions. Only a break below 1.0045 would question the positive tone, exposing 0.9975.
FOREX FOCUS
Interest rates are once again the only game in town. The political turmoil in Egypt may have shaken the currency kaleidoscope for a short while, and if the political tensions spread to other countries in the Middle East, risk will once again become a currency issue. But risk is not an issue right now. If anything, the impact interest-rate speculation is having on currencies has probably intensified over the past few days. With the European benchmark for crude oil prices rising to over $100 a barrel for the first time in two years and other commodity prices remaining strong, there has been more talk of the need to combat the rise in inflation. At the moment, the euro, the pound and the commodity currencies are among the biggest winners. There is nothing new about the hawkish stance of the European Central Bank. But, for the first time, financial markets might be taking this hawkishness seriously. Up until now, the assumption was that there was little the ECB could do while the funding costs of the euro zone's peripheral debtors was still rising and the risk of a sovereign default remained high. However, recent progress in negotiations within the European Union for a credit rescue package has changed all that. The falling cost of credit default swaps for "peripherals" has helped to raise expectations that the ECB can probably respond to higher inflation pressures with tighter monetary policy if it wants to. Optimism that the European Union is closer to a permanent solution to the sovereign debt crisis is also providing help for the pound, as this helps to remove the threat of default for the U.K.'s highly exposed banks. Again, this will make it easier for the Bank of England to respond to the higher inflation pressures posed by commodity prices, with the National Institute of Economic and Social Research warning early Tuesday that the Bank will end up raising rates three times this year.
EUROPE
The euro has paused Wednesday from the steady gains that took it close to three-month highs against the dollar as the upcoming U.S. ADP jobs report added a note of caution to the day's proceedings, but support for the single currency remains strong. Earlier Wednesday, the euro reached it highest level against the dollar since Nov. 9, stopping short of $1.39 at $1.3862. But despite backing off day highs, its perch above $1.38 remains intact amid solid demand. The euro's gains have been attributed to a confluence of factors. A pickup in economic data from around the world has been followed by tensions easing in Egypt, where President Hosni Mubarak pledged to step down this year, which in turn saw investors move back into assets seen as carrying greater risks. With oil prices remaining elevated, markets are considering which central banks are most likely to make early moves on lifting interest rates, and the European Central bank is tipped to move before the Fed. But at this point, interest-rate expectations are looking over-stretched in the euro's favor, making the currency vulnerable to a reversal in fortunes, Credit Agricole said in a research note. The trigger for such a move may come from the ADP employment report, the bank said. "ADP might provide pressure release valve."
ASIA
The euro and British pound rose to fresh multi-month highs against the dollar in Asia Wednesday, as strong regional equities prodded investors to buy the risk-sensitive currencies. The gains were supported by speculation that rising inflation in the E.U. and the U.K. may lead to nearer-term rate hikes in those areas. Dealers said attention for the rest of the global day will be on the E.U.'s producer price index for December, due at 1000 GMT, and on U.S. jobs data for January from payroll giant Automatic Data Processing Inc. Strength in the E.U. figures could further buoy the euro, although even solid U.S. data may not help the dollar much dealers said, as the job market still has far to go, keeping any Federal Reserve tightening a ways off. Stronger Asian bourses Wednesday prompted short-term investors in Asia to buy risk-sensitive currencies such as the euro and pound against the safe-haven dollar, traders said. The gain in equities was led by Japan's benchmark Nikkei Stock Average, which was up 1.9% in late afternoon trade. Demand for higher-yielding, riskier assets pushed the common currency to a new high of almost three months at $1.3862, its highest mark since Nov. 9. At 0450 GMT, it was at $1.3860, up from $1.3829 late Tuesday in New York.
WORLD
The euro surged to a two-and-a-half month high against the dollar Tuesday in New York as investor appetite for riskier assets increased and expectations for an interest-rate hike in the euro zone grew. The euro climbed above $1.38 for the first time since Nov. 11 and was able to hold above that level as traders opted for riskier assets, pressuring classic safe havens such as the dollar. Analysts said strong economic data globally buoyed expectations for European growth and worries momentarily eased that Egyptian protests would create broader unrest in the Middle East or lead to a shut down of the Suez Canal, a key artery for the transport of oil. Egyptian President Hosni Mubarak said in a televised statement that he will not seek re-election in September. "This morning's data was a big boost to risk appetite," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. Esiner said the manufacturing readings in the 17-nation euro zone, U.K. and U.S. all added to the market's improving risk sentiment. That led to a broad sell-off in the dollar. The dollar fell to its lowest level against the U.K. pound since Nov. 12 and touched a nearly one-month low against the Swiss franc Tuesday. Manufacturing activity in the U.K. expanded at its strongest rate in at least 19 years in January, while euro zone manufacturing activity jumped to a nine-month high. U.S. manufacturing activity last month reached its highest level since 2004. Strong economic readings added to expectations that the European Central Bank will be forced to raise interest rates to fight rising inflation this year. The Bank of England could also contemplate a rate hike to rein in rising inflation.
The powerful uptrend sets fresh two-month highs, and the next port of call above Wednesday's current session high at 1.3862 is the 1.3950 area. The 76.4% Fibonacci retracement level of the 1.4283/1.2860 bear wave lies at 1.3947, and a measured target based on the recent 190-pip consolidation range highlights 1.3950. Backup resistance lies at 1.4000. Downside risk looks limited to the 1.3750 area, but a lot of work would be required to wrest control from USD bears.
GBP/USD
The bull wave off last week's 1.5752 low is extending strongly into fresh twelve-week highs, and is closing in on the 1.6211 target. The 1.6211 level represents a 1.618 Fibonacci extension target, but the key November reaction high at 1.6298 is now looking vulnerable. Corrective weakness will attract support while above 1.6000, which is protected by 1.6075.
USD/JPY
The support line of a three-month bear pennant is being challenged at 81.31, as the robust downtrend continues to dominate. The sharpness of the decline off the Jan. 27 83.22 high creates room for a break below 81.31 this week, exposing the 2011 low at 80.93 and the bear pennant low at 80.21 from last November. Corrective gains are limited to the 81.92 area, and only above there would provide a near-term boost.
AUD/USD
Corrects off Tuesday's high at 1.0150, with downside risk limited to the 1.0045 area. This week's strong recovery off 0.9866 is likely to keep 1.0045 protected, and prompt a fresh wave of bull pressure to the 1.0150 high. Tuesday's strength also negated a three-week bear pennant, and a return to the Dec. 28-year high at 1.0258 is expected in the coming sessions. Only a break below 1.0045 would question the positive tone, exposing 0.9975.
FOREX FOCUS
Interest rates are once again the only game in town. The political turmoil in Egypt may have shaken the currency kaleidoscope for a short while, and if the political tensions spread to other countries in the Middle East, risk will once again become a currency issue. But risk is not an issue right now. If anything, the impact interest-rate speculation is having on currencies has probably intensified over the past few days. With the European benchmark for crude oil prices rising to over $100 a barrel for the first time in two years and other commodity prices remaining strong, there has been more talk of the need to combat the rise in inflation. At the moment, the euro, the pound and the commodity currencies are among the biggest winners. There is nothing new about the hawkish stance of the European Central Bank. But, for the first time, financial markets might be taking this hawkishness seriously. Up until now, the assumption was that there was little the ECB could do while the funding costs of the euro zone's peripheral debtors was still rising and the risk of a sovereign default remained high. However, recent progress in negotiations within the European Union for a credit rescue package has changed all that. The falling cost of credit default swaps for "peripherals" has helped to raise expectations that the ECB can probably respond to higher inflation pressures with tighter monetary policy if it wants to. Optimism that the European Union is closer to a permanent solution to the sovereign debt crisis is also providing help for the pound, as this helps to remove the threat of default for the U.K.'s highly exposed banks. Again, this will make it easier for the Bank of England to respond to the higher inflation pressures posed by commodity prices, with the National Institute of Economic and Social Research warning early Tuesday that the Bank will end up raising rates three times this year.
EUROPE
The euro has paused Wednesday from the steady gains that took it close to three-month highs against the dollar as the upcoming U.S. ADP jobs report added a note of caution to the day's proceedings, but support for the single currency remains strong. Earlier Wednesday, the euro reached it highest level against the dollar since Nov. 9, stopping short of $1.39 at $1.3862. But despite backing off day highs, its perch above $1.38 remains intact amid solid demand. The euro's gains have been attributed to a confluence of factors. A pickup in economic data from around the world has been followed by tensions easing in Egypt, where President Hosni Mubarak pledged to step down this year, which in turn saw investors move back into assets seen as carrying greater risks. With oil prices remaining elevated, markets are considering which central banks are most likely to make early moves on lifting interest rates, and the European Central bank is tipped to move before the Fed. But at this point, interest-rate expectations are looking over-stretched in the euro's favor, making the currency vulnerable to a reversal in fortunes, Credit Agricole said in a research note. The trigger for such a move may come from the ADP employment report, the bank said. "ADP might provide pressure release valve."
ASIA
The euro and British pound rose to fresh multi-month highs against the dollar in Asia Wednesday, as strong regional equities prodded investors to buy the risk-sensitive currencies. The gains were supported by speculation that rising inflation in the E.U. and the U.K. may lead to nearer-term rate hikes in those areas. Dealers said attention for the rest of the global day will be on the E.U.'s producer price index for December, due at 1000 GMT, and on U.S. jobs data for January from payroll giant Automatic Data Processing Inc. Strength in the E.U. figures could further buoy the euro, although even solid U.S. data may not help the dollar much dealers said, as the job market still has far to go, keeping any Federal Reserve tightening a ways off. Stronger Asian bourses Wednesday prompted short-term investors in Asia to buy risk-sensitive currencies such as the euro and pound against the safe-haven dollar, traders said. The gain in equities was led by Japan's benchmark Nikkei Stock Average, which was up 1.9% in late afternoon trade. Demand for higher-yielding, riskier assets pushed the common currency to a new high of almost three months at $1.3862, its highest mark since Nov. 9. At 0450 GMT, it was at $1.3860, up from $1.3829 late Tuesday in New York.
WORLD
The euro surged to a two-and-a-half month high against the dollar Tuesday in New York as investor appetite for riskier assets increased and expectations for an interest-rate hike in the euro zone grew. The euro climbed above $1.38 for the first time since Nov. 11 and was able to hold above that level as traders opted for riskier assets, pressuring classic safe havens such as the dollar. Analysts said strong economic data globally buoyed expectations for European growth and worries momentarily eased that Egyptian protests would create broader unrest in the Middle East or lead to a shut down of the Suez Canal, a key artery for the transport of oil. Egyptian President Hosni Mubarak said in a televised statement that he will not seek re-election in September. "This morning's data was a big boost to risk appetite," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. Esiner said the manufacturing readings in the 17-nation euro zone, U.K. and U.S. all added to the market's improving risk sentiment. That led to a broad sell-off in the dollar. The dollar fell to its lowest level against the U.K. pound since Nov. 12 and touched a nearly one-month low against the Swiss franc Tuesday. Manufacturing activity in the U.K. expanded at its strongest rate in at least 19 years in January, while euro zone manufacturing activity jumped to a nine-month high. U.S. manufacturing activity last month reached its highest level since 2004. Strong economic readings added to expectations that the European Central Bank will be forced to raise interest rates to fight rising inflation this year. The Bank of England could also contemplate a rate hike to rein in rising inflation.
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