EUR/USD
Tuesday's strong recovery off 1.3855 brings the focus back onto the Mar. 7 reaction high at 1.4036. A break through 1.4036 is expected to attract further gains to 1.4085, and the monthly Ichimoku cloud resistance level at 1.4185. Corrective weakness has limited scope to the 1.3900 area, which protects the 1.3855 low.
GBP/USD
The corrective recovery off 1.5978 is set to extend above 1.6101 towards 1.6140 and Monday's high at 1.6199. However, this rally is forming the right-hand shoulder of a larger bearish head-and-shoulders top, and corrective upside risk is limited to the 1.6277 area. A return to support would threaten a neckline break, exposing 1.5837 initially, but with scope for 1.5770 on a slightly longer-term basis.
USD/JPY
The USD is back on its knees, as bears pile pressure on Monday's 2011 low at 80.60. A four-month bear pennant continuation pattern has been completed, and the base of the pattern at 80.21 is likely to be challenged. The key April 1995 all-time low at 79.75 is also vulnerable on concerted weakness. Short-term pivotal resistance lies at 81.22, and only above there would provide temporary respite, opening 81.55.
AUD/USD
The recovery off 0.9815 is expected to extend above 0.9953, and retrace most of Tuesday's wide-ranging down-day. A sustained push above 0.9953 would re-open parity and the 1.0062 resistance area, as part of an eleven-week lateral consolidation phase between 0.9804 and 1.0258. Failure to keep Tuesday's low at 0.9815 would create scope for bull flag support at 0.9743.
FOREX FOCUS
Last Friday and Saturday brought some good news for the euro zone and horrific news for Japan. Yet, in the aftermath, the euro has not only fallen against the yen but failed to make any headway against the dollar. Go figure. If anything, the compromise decision by European Union leaders to extend the European Financial Stability Facility and perhaps bring an end to the sovereign-debt crisis should make an early rise in euro-zone interest rates more likely. With the funding costs of peripheral debtor nations on the slide since the compromise was reached, the European Central Bank will be far less worried about increasing rates by 25 basis points next month. Higher rates, along with the reduced risk of a sovereign-debt default, should make the euro more attractive. But there are three reasons why this may not be happening. First is that compromise agreement. Despite initial optimism over the accord, there are reports of disagreement among finance ministers about implementation and concerns that the whole package still lacks any real teeth to stop member nations from falling short of achieving their fiscal goals. In fact, a certain amount of skepticism has gradually crept in. The strategy team at Commerzbank sums it up: "It seems increasingly likely that the measures (to be) announced on March 24/25 will not really satisfy the foreign exchange markets. Instead it can be expected that there will be more quantity than quality."
EUROPE
The euro took in its stride a ratings downgrade of Portugal overnight but attempts to push it past the $1.40 level against the dollar are proving difficult, while the yen remained steady as some semblance of normality returned to financial markets after share prices in Tokyo recovered some of their losses since the start of the week. That said, the outlook in Japan is still marked by uncertainty after the earthquake Friday and news on the escalating nuclear crisis in the country continues to keep investors on edge. "My suspicion is that this is temporary respite," Neil Mellor, currency strategist at Bank of New York Mellon said of the relative calm in the currency market. Analysts at BNP Paribas too noted some stabilization in confidence levels overall, but said that although the euro is finding decent support, the news surrounding the currency is still negative after Moody's downgraded Portugal by two notches to A3, making it hard for the single currency to pierce through $1.40. "Some of the shine has also been taken off the agreement made at the EU Summit and the Ecofin meeting, with Trichet criticizing the agreement for dealing with countries that have high debt levels as not being tough enough," they said in a note to clients, adding that the euro may dip towards $1.3860. Mellor at Bank of New York Mellon said he expects the dollar to emerge as the safe haven of choice despite the fiscal and monetary policy troubles in the U.S. As the yen continues to find safe-haven buying demand, it has been able to rise against the euro, he added
ASIA
The euro was slightly weaker in early afternoon Asian trading Wednesday after Moody's earlier announced a downgrade of Portugal's long-term government bond ratings. However, the selloff wasn't extensive, with most traders treating it as a distraction to bigger issues still ongoing in Japan. Some traders said the downgrade was simply "Moody's playing catch up" with other ratings agencies. "This doesn't represent a new wave of downgrades," said Sean Callow, currency strategist at Westpac Banking Corp. Moody's downgraded its ratings by two notches, to A3, saying the country will continue to face low growth and funding pressure for years, even if it taps the European Union's bailout fund. "Accessing the European Financial Stability Facility may lead to a reduction in financing costs, but questions would remain as to when the government would be able to re-access the capital markets and on what terms," Moody's said. The rating is now four levels into investment-grade territory, and is on negative outlook, meaning future downgrades are possible. At 0450 GMT, the euro was at $1.3970 from $1.4000 late Tuesday in New York. It traded hands at Y112.94 compared with Y114.22. The dollar was at Y80.82 from Y80.93. Japan's benchmark Nikkei Stock Average was up 3.4% in afternoon trade, giving up some earlier gains after an aftershock shook Tokyo. Despite the rise, share prices remain down sharply on the week. "There is a lot of bad news already in that price," Callow said.
WORLD
Nervous traders jumped into perceived safe havens such as the yen and Swiss franc Tuesday in New York as reports of further explosions at Japan's Fukushima nuclear power plant sent currencies tied to global growth sharply lower across the board. A full-blown nuclear disaster could put pressure on global energy supplies, stoke more oil-driven inflation and have a profound effect in slowing global growth. While higher oil prices typically feed headline inflation, which is normally positive for growth-tied currencies when central banks have to hike rates, these price pressures are also a longer-term drag on economic growth, said currency analysts. A case in point is the commodity-driven, export-tied Australian dollar, which is heavily dependent on exports to Japan, the world's third-largest economy, said Steven Englander, head of G10 strategy at Citigroup in New York. The Australian dollar fell by nearly 2% against the U.S. dollar Tuesday, the worst-performing G10 currency. "The Aussie does really well when conditions are good, and does badly when times are bad," exactly for these reasons, he said. Separately, the euro defied the safe-haven trend by surging still higher against the U.S. dollar, lifted by expectations of a rate hike come April that would burnish the currency's yield appeal. The single currency traded up past $1.4000 in late afternoon trade to its second-highest level all year.
Rabu, 16 Maret 2011
Selasa, 15 Maret 2011
FOREX Intraday snapshot
EUR/USD
Remains capped beneath 1.4000 as support at 1.3892 is tested. A push below 1.3892 is expected to extend the corrective bull pennant, creating scope for more downside consolidation towards projected support at 1.3785. However, the Mar. 11 reaction low at 1.3752 is secure. A push through Monday's 1.4003 high is required to re-open last week's 1.4036 reaction high.
GBP/USD
Suffers a setback off resistance at 1.6200, and more weakness is expected to the 1.6029 area. This 1.6029 area needs to hold in order to protect the Mar. 11 reaction low at 1.5978, and strengthen the key Mar. 2 reaction high at 1.6344. Only a push above 1.6200 would put bulls in control of the near-term, opening 1.6242.
USD/JPY
A recovery off 81.22 is underway towards the 82.05 intraday lower high. A push through 82.05 would confirm 81.22 as a near-term bear failure, and attract further strength to 82.30 and Monday's peak at 82.46. Failure to force a break through 82.05 would prompt a return to the 81.22 low, as part of a wider bearish continuation pattern.
AUD/USD
A downside probe to 0.9925 through the recent range floor threatens further weakness towards higher lows at 0.9866 and 0.9832. However, the Jan. 12 reaction low at 0.9804 needs to be broken in order to concern longer-term bulls. Regaining ground above 1.0062 is required to lift the tone and re-open 1.0110.
FOREX Focus
Japan should get the weak yen it needs. Certainly, there will be some yen-positive flows as Japanese insurers and Japanese companies repatriate overseas holdings to help with the relief effort after Friday's earthquake. But, it is the government's and the Bank of Japan's fiscal and monetary response to the devastation that will ultimately dictate the downward path of the Japanese currency, and ensure that it loses the safe-haven status that has been helping it in recent months. For Japan, and its recovery, this could be key. Finance Minister Yoshihiko Noda has already made this crystal clear, warning financial markets that he is willing to intervene to push the value of the yen down, given how vital exports will be for the country's recovery from this crisis. The recent strength of the yen had been looking questionable even before the sirens went off Friday in north-east Japan, warning that an underwater earthquake had sent a 10-meter-high wave hurtling towards the coast. The Japanese economy was already virtually on its knees. Repeated spending programs aimed at pulling the economy out of recession had pushed the country's debt-to-GDP ratio to a global record-busting 200%. The Bank of Japan, which had long ago slashed its interest rates to virtually zero, had provided its monetary help through repeated increases in its asset-purchase programs. While the fiscal profligacy left the country's credit rating tumbling, the monetary easing left the yield premium offered by other countries rising. Yet, in a world troubled by the spring uprising in the Middle East and North Africa as well as the sovereign debt crisis in the euro zone, the yen was still clinging on to its traditional reputation as safe haven. This, however, should now come to an end. European Union leaders appear to have finally come up with a compromise solution that should help prevent any serious sovereign default there, and despite continued concerns about the monarchies in Bahrain and Saudi Arabia, the Middle East crisis so far hasn't erupted as violently as many had feared. The yen's initial reaction to the earthquake was a knee-jerk fall, but this quickly went into reverse as financial markets started to anticipate repatriation flows and looked at the 18% rally the yen staged after a massive earthquake in the city of Kobe in 1995.
Europe
The dollar rallied in European trading hours against the euro and higher-yielding Asian currencies amid wild trade Tuesday as panic gripped investors on mounting worries over Japan's escalating nuclear emergency. Investors have sought refuge in safe-haven currencies such as the greenback and Swiss franc while the yen ended largely unchanged as market participants remained uncertain about the unit's prospects.
Asia
The yen stabilized Monday morning in Asia after a choppy start to the day, as the Bank of Japan took unprecedented steps to boost market liquidity following Friday's earthquake and tsunami. In announcements throughout the morning, the BOJ offered to inject a record 18 trillion yen into money markets -- Y15 trillion in same-day funds through three separate operations, plus three trillion yen in repurchase agreements. The yen had spiked sharply upward in early trading on expectations of repatriation flows, but soon erased those gains and traded in a tight band from around 0100 GMT. As of 0450 GMT, the U.S. dollar was trading around Y82.12, up from an earlier low of Y80.60, the greenback's lowest level against the yen since Nov. 9. While repatriations would tend to buoy the yen, the BOJ liquidity injections, combined with signals from Japanese officials that they could intervene in currency markets if necessary, kept the U.S. dollar supported for now. A strengthening yen could hurt Japan's export-dependent economy. Meanwhile, Chinese Premier Wen Jiabao, in closing remarks to China's annual legislative gathering, stressed that the yuan's appreciation must be gradual. Wen said the government needs to consider the impact on employment, business and overall social stability. That could point to a slower pace of appreciation, especially after China posted a trade surprise deficit of $7.3 billion in February. The dollar/yuan central parity rate was set Monday at $6.5701, vs 6.5750 on Friday. In Japan, Finance Minister Yoshihiko Noda said Monday morning that authorities will monitor yen levels for now. A senior Finance Ministry official warned Monday morning of the possibility of intervention to stem a strong yen rise. Authorities "will take decisive steps if necessary," he told reporters at the Finance Ministry.
World
Japan's yen surged against other major currencies Friday in New York after a devastating earthquake set off expectations that companies will repatriate yen to help pay for rebuilding efforts. Traders swiftly sold the yen just after the earthquake before reversing course. The dollar fell about 1.4% against the yen on the day, while the euro was down about 0.5% against the yen. "Speculation in advance of repatriation, that's what is driving the yen up right now," said Jeffrey Young, head of North American FX Research at Barclays Capital in New York. Traders are betting that insurers with exposure to Japan and companies based in the country will soon need to buy large quantities of yen to cover damages and pay out insurance claims. They would be forced to exchange foreign currencies for yen, further hurting the dollar, euro and other major units. But it is still too early to assess the extent of the damage and how much money may be needed to rebuild parts of the country that were destroyed by the earthquake and tsunami it triggered, leading to some uncertainty about longer term currency moves. "I'm personally not expecting a huge yen appreciation, but the net impact is probably negative for dollar/yen," said a portfolio manager at a London-based hedge fund. This source expects some Japanese firms to repatriate cash, but only gradually - and he doesn't expect a massive flow of yen back into Japan. The long-term effects on Japan's economy and the yen were still not known. But Moody's Investors Service said it was highly unlikely the country's debt rating would be affected by the earthquake.
Remains capped beneath 1.4000 as support at 1.3892 is tested. A push below 1.3892 is expected to extend the corrective bull pennant, creating scope for more downside consolidation towards projected support at 1.3785. However, the Mar. 11 reaction low at 1.3752 is secure. A push through Monday's 1.4003 high is required to re-open last week's 1.4036 reaction high.
GBP/USD
Suffers a setback off resistance at 1.6200, and more weakness is expected to the 1.6029 area. This 1.6029 area needs to hold in order to protect the Mar. 11 reaction low at 1.5978, and strengthen the key Mar. 2 reaction high at 1.6344. Only a push above 1.6200 would put bulls in control of the near-term, opening 1.6242.
USD/JPY
A recovery off 81.22 is underway towards the 82.05 intraday lower high. A push through 82.05 would confirm 81.22 as a near-term bear failure, and attract further strength to 82.30 and Monday's peak at 82.46. Failure to force a break through 82.05 would prompt a return to the 81.22 low, as part of a wider bearish continuation pattern.
AUD/USD
A downside probe to 0.9925 through the recent range floor threatens further weakness towards higher lows at 0.9866 and 0.9832. However, the Jan. 12 reaction low at 0.9804 needs to be broken in order to concern longer-term bulls. Regaining ground above 1.0062 is required to lift the tone and re-open 1.0110.
FOREX Focus
Japan should get the weak yen it needs. Certainly, there will be some yen-positive flows as Japanese insurers and Japanese companies repatriate overseas holdings to help with the relief effort after Friday's earthquake. But, it is the government's and the Bank of Japan's fiscal and monetary response to the devastation that will ultimately dictate the downward path of the Japanese currency, and ensure that it loses the safe-haven status that has been helping it in recent months. For Japan, and its recovery, this could be key. Finance Minister Yoshihiko Noda has already made this crystal clear, warning financial markets that he is willing to intervene to push the value of the yen down, given how vital exports will be for the country's recovery from this crisis. The recent strength of the yen had been looking questionable even before the sirens went off Friday in north-east Japan, warning that an underwater earthquake had sent a 10-meter-high wave hurtling towards the coast. The Japanese economy was already virtually on its knees. Repeated spending programs aimed at pulling the economy out of recession had pushed the country's debt-to-GDP ratio to a global record-busting 200%. The Bank of Japan, which had long ago slashed its interest rates to virtually zero, had provided its monetary help through repeated increases in its asset-purchase programs. While the fiscal profligacy left the country's credit rating tumbling, the monetary easing left the yield premium offered by other countries rising. Yet, in a world troubled by the spring uprising in the Middle East and North Africa as well as the sovereign debt crisis in the euro zone, the yen was still clinging on to its traditional reputation as safe haven. This, however, should now come to an end. European Union leaders appear to have finally come up with a compromise solution that should help prevent any serious sovereign default there, and despite continued concerns about the monarchies in Bahrain and Saudi Arabia, the Middle East crisis so far hasn't erupted as violently as many had feared. The yen's initial reaction to the earthquake was a knee-jerk fall, but this quickly went into reverse as financial markets started to anticipate repatriation flows and looked at the 18% rally the yen staged after a massive earthquake in the city of Kobe in 1995.
Europe
The dollar rallied in European trading hours against the euro and higher-yielding Asian currencies amid wild trade Tuesday as panic gripped investors on mounting worries over Japan's escalating nuclear emergency. Investors have sought refuge in safe-haven currencies such as the greenback and Swiss franc while the yen ended largely unchanged as market participants remained uncertain about the unit's prospects.
Asia
The yen stabilized Monday morning in Asia after a choppy start to the day, as the Bank of Japan took unprecedented steps to boost market liquidity following Friday's earthquake and tsunami. In announcements throughout the morning, the BOJ offered to inject a record 18 trillion yen into money markets -- Y15 trillion in same-day funds through three separate operations, plus three trillion yen in repurchase agreements. The yen had spiked sharply upward in early trading on expectations of repatriation flows, but soon erased those gains and traded in a tight band from around 0100 GMT. As of 0450 GMT, the U.S. dollar was trading around Y82.12, up from an earlier low of Y80.60, the greenback's lowest level against the yen since Nov. 9. While repatriations would tend to buoy the yen, the BOJ liquidity injections, combined with signals from Japanese officials that they could intervene in currency markets if necessary, kept the U.S. dollar supported for now. A strengthening yen could hurt Japan's export-dependent economy. Meanwhile, Chinese Premier Wen Jiabao, in closing remarks to China's annual legislative gathering, stressed that the yuan's appreciation must be gradual. Wen said the government needs to consider the impact on employment, business and overall social stability. That could point to a slower pace of appreciation, especially after China posted a trade surprise deficit of $7.3 billion in February. The dollar/yuan central parity rate was set Monday at $6.5701, vs 6.5750 on Friday. In Japan, Finance Minister Yoshihiko Noda said Monday morning that authorities will monitor yen levels for now. A senior Finance Ministry official warned Monday morning of the possibility of intervention to stem a strong yen rise. Authorities "will take decisive steps if necessary," he told reporters at the Finance Ministry.
World
Japan's yen surged against other major currencies Friday in New York after a devastating earthquake set off expectations that companies will repatriate yen to help pay for rebuilding efforts. Traders swiftly sold the yen just after the earthquake before reversing course. The dollar fell about 1.4% against the yen on the day, while the euro was down about 0.5% against the yen. "Speculation in advance of repatriation, that's what is driving the yen up right now," said Jeffrey Young, head of North American FX Research at Barclays Capital in New York. Traders are betting that insurers with exposure to Japan and companies based in the country will soon need to buy large quantities of yen to cover damages and pay out insurance claims. They would be forced to exchange foreign currencies for yen, further hurting the dollar, euro and other major units. But it is still too early to assess the extent of the damage and how much money may be needed to rebuild parts of the country that were destroyed by the earthquake and tsunami it triggered, leading to some uncertainty about longer term currency moves. "I'm personally not expecting a huge yen appreciation, but the net impact is probably negative for dollar/yen," said a portfolio manager at a London-based hedge fund. This source expects some Japanese firms to repatriate cash, but only gradually - and he doesn't expect a massive flow of yen back into Japan. The long-term effects on Japan's economy and the yen were still not known. But Moody's Investors Service said it was highly unlikely the country's debt rating would be affected by the earthquake.
FOREX Intraday snapshot
EUR/USD
Remains capped beneath 1.4000 as support at 1.3892 is tested. A push below 1.3892 is expected to extend the corrective bull pennant, creating scope for more downside consolidation towards projected support at 1.3785. However, the Mar. 11 reaction low at 1.3752 is secure. A push through Monday's 1.4003 high is required to re-open last week's 1.4036 reaction high.
GBP/USD
Suffers a setback off resistance at 1.6200, and more weakness is expected to the 1.6029 area. This 1.6029 area needs to hold in order to protect the Mar. 11 reaction low at 1.5978, and strengthen the key Mar. 2 reaction high at 1.6344. Only a push above 1.6200 would put bulls in control of the near-term, opening 1.6242.
USD/JPY
A recovery off 81.22 is underway towards the 82.05 intraday lower high. A push through 82.05 would confirm 81.22 as a near-term bear failure, and attract further strength to 82.30 and Monday's peak at 82.46. Failure to force a break through 82.05 would prompt a return to the 81.22 low, as part of a wider bearish continuation pattern.
AUD/USD
A downside probe to 0.9925 through the recent range floor threatens further weakness towards higher lows at 0.9866 and 0.9832. However, the Jan. 12 reaction low at 0.9804 needs to be broken in order to concern longer-term bulls. Regaining ground above 1.0062 is required to lift the tone and re-open 1.0110.
FOREX Focus
Japan should get the weak yen it needs. Certainly, there will be some yen-positive flows as Japanese insurers and Japanese companies repatriate overseas holdings to help with the relief effort after Friday's earthquake. But, it is the government's and the Bank of Japan's fiscal and monetary response to the devastation that will ultimately dictate the downward path of the Japanese currency, and ensure that it loses the safe-haven status that has been helping it in recent months. For Japan, and its recovery, this could be key. Finance Minister Yoshihiko Noda has already made this crystal clear, warning financial markets that he is willing to intervene to push the value of the yen down, given how vital exports will be for the country's recovery from this crisis. The recent strength of the yen had been looking questionable even before the sirens went off Friday in north-east Japan, warning that an underwater earthquake had sent a 10-meter-high wave hurtling towards the coast. The Japanese economy was already virtually on its knees. Repeated spending programs aimed at pulling the economy out of recession had pushed the country's debt-to-GDP ratio to a global record-busting 200%. The Bank of Japan, which had long ago slashed its interest rates to virtually zero, had provided its monetary help through repeated increases in its asset-purchase programs. While the fiscal profligacy left the country's credit rating tumbling, the monetary easing left the yield premium offered by other countries rising. Yet, in a world troubled by the spring uprising in the Middle East and North Africa as well as the sovereign debt crisis in the euro zone, the yen was still clinging on to its traditional reputation as safe haven. This, however, should now come to an end. European Union leaders appear to have finally come up with a compromise solution that should help prevent any serious sovereign default there, and despite continued concerns about the monarchies in Bahrain and Saudi Arabia, the Middle East crisis so far hasn't erupted as violently as many had feared. The yen's initial reaction to the earthquake was a knee-jerk fall, but this quickly went into reverse as financial markets started to anticipate repatriation flows and looked at the 18% rally the yen staged after a massive earthquake in the city of Kobe in 1995.
Europe
The dollar rallied in European trading hours against the euro and higher-yielding Asian currencies amid wild trade Tuesday as panic gripped investors on mounting worries over Japan's escalating nuclear emergency. Investors have sought refuge in safe-haven currencies such as the greenback and Swiss franc while the yen ended largely unchanged as market participants remained uncertain about the unit's prospects.
Asia
The yen stabilized Monday morning in Asia after a choppy start to the day, as the Bank of Japan took unprecedented steps to boost market liquidity following Friday's earthquake and tsunami. In announcements throughout the morning, the BOJ offered to inject a record 18 trillion yen into money markets -- Y15 trillion in same-day funds through three separate operations, plus three trillion yen in repurchase agreements. The yen had spiked sharply upward in early trading on expectations of repatriation flows, but soon erased those gains and traded in a tight band from around 0100 GMT. As of 0450 GMT, the U.S. dollar was trading around Y82.12, up from an earlier low of Y80.60, the greenback's lowest level against the yen since Nov. 9. While repatriations would tend to buoy the yen, the BOJ liquidity injections, combined with signals from Japanese officials that they could intervene in currency markets if necessary, kept the U.S. dollar supported for now. A strengthening yen could hurt Japan's export-dependent economy. Meanwhile, Chinese Premier Wen Jiabao, in closing remarks to China's annual legislative gathering, stressed that the yuan's appreciation must be gradual. Wen said the government needs to consider the impact on employment, business and overall social stability. That could point to a slower pace of appreciation, especially after China posted a trade surprise deficit of $7.3 billion in February. The dollar/yuan central parity rate was set Monday at $6.5701, vs 6.5750 on Friday. In Japan, Finance Minister Yoshihiko Noda said Monday morning that authorities will monitor yen levels for now. A senior Finance Ministry official warned Monday morning of the possibility of intervention to stem a strong yen rise. Authorities "will take decisive steps if necessary," he told reporters at the Finance Ministry.
World
Japan's yen surged against other major currencies Friday in New York after a devastating earthquake set off expectations that companies will repatriate yen to help pay for rebuilding efforts. Traders swiftly sold the yen just after the earthquake before reversing course. The dollar fell about 1.4% against the yen on the day, while the euro was down about 0.5% against the yen. "Speculation in advance of repatriation, that's what is driving the yen up right now," said Jeffrey Young, head of North American FX Research at Barclays Capital in New York. Traders are betting that insurers with exposure to Japan and companies based in the country will soon need to buy large quantities of yen to cover damages and pay out insurance claims. They would be forced to exchange foreign currencies for yen, further hurting the dollar, euro and other major units. But it is still too early to assess the extent of the damage and how much money may be needed to rebuild parts of the country that were destroyed by the earthquake and tsunami it triggered, leading to some uncertainty about longer term currency moves. "I'm personally not expecting a huge yen appreciation, but the net impact is probably negative for dollar/yen," said a portfolio manager at a London-based hedge fund. This source expects some Japanese firms to repatriate cash, but only gradually - and he doesn't expect a massive flow of yen back into Japan. The long-term effects on Japan's economy and the yen were still not known. But Moody's Investors Service said it was highly unlikely the country's debt rating would be affected by the earthquake.
Remains capped beneath 1.4000 as support at 1.3892 is tested. A push below 1.3892 is expected to extend the corrective bull pennant, creating scope for more downside consolidation towards projected support at 1.3785. However, the Mar. 11 reaction low at 1.3752 is secure. A push through Monday's 1.4003 high is required to re-open last week's 1.4036 reaction high.
GBP/USD
Suffers a setback off resistance at 1.6200, and more weakness is expected to the 1.6029 area. This 1.6029 area needs to hold in order to protect the Mar. 11 reaction low at 1.5978, and strengthen the key Mar. 2 reaction high at 1.6344. Only a push above 1.6200 would put bulls in control of the near-term, opening 1.6242.
USD/JPY
A recovery off 81.22 is underway towards the 82.05 intraday lower high. A push through 82.05 would confirm 81.22 as a near-term bear failure, and attract further strength to 82.30 and Monday's peak at 82.46. Failure to force a break through 82.05 would prompt a return to the 81.22 low, as part of a wider bearish continuation pattern.
AUD/USD
A downside probe to 0.9925 through the recent range floor threatens further weakness towards higher lows at 0.9866 and 0.9832. However, the Jan. 12 reaction low at 0.9804 needs to be broken in order to concern longer-term bulls. Regaining ground above 1.0062 is required to lift the tone and re-open 1.0110.
FOREX Focus
Japan should get the weak yen it needs. Certainly, there will be some yen-positive flows as Japanese insurers and Japanese companies repatriate overseas holdings to help with the relief effort after Friday's earthquake. But, it is the government's and the Bank of Japan's fiscal and monetary response to the devastation that will ultimately dictate the downward path of the Japanese currency, and ensure that it loses the safe-haven status that has been helping it in recent months. For Japan, and its recovery, this could be key. Finance Minister Yoshihiko Noda has already made this crystal clear, warning financial markets that he is willing to intervene to push the value of the yen down, given how vital exports will be for the country's recovery from this crisis. The recent strength of the yen had been looking questionable even before the sirens went off Friday in north-east Japan, warning that an underwater earthquake had sent a 10-meter-high wave hurtling towards the coast. The Japanese economy was already virtually on its knees. Repeated spending programs aimed at pulling the economy out of recession had pushed the country's debt-to-GDP ratio to a global record-busting 200%. The Bank of Japan, which had long ago slashed its interest rates to virtually zero, had provided its monetary help through repeated increases in its asset-purchase programs. While the fiscal profligacy left the country's credit rating tumbling, the monetary easing left the yield premium offered by other countries rising. Yet, in a world troubled by the spring uprising in the Middle East and North Africa as well as the sovereign debt crisis in the euro zone, the yen was still clinging on to its traditional reputation as safe haven. This, however, should now come to an end. European Union leaders appear to have finally come up with a compromise solution that should help prevent any serious sovereign default there, and despite continued concerns about the monarchies in Bahrain and Saudi Arabia, the Middle East crisis so far hasn't erupted as violently as many had feared. The yen's initial reaction to the earthquake was a knee-jerk fall, but this quickly went into reverse as financial markets started to anticipate repatriation flows and looked at the 18% rally the yen staged after a massive earthquake in the city of Kobe in 1995.
Europe
The dollar rallied in European trading hours against the euro and higher-yielding Asian currencies amid wild trade Tuesday as panic gripped investors on mounting worries over Japan's escalating nuclear emergency. Investors have sought refuge in safe-haven currencies such as the greenback and Swiss franc while the yen ended largely unchanged as market participants remained uncertain about the unit's prospects.
Asia
The yen stabilized Monday morning in Asia after a choppy start to the day, as the Bank of Japan took unprecedented steps to boost market liquidity following Friday's earthquake and tsunami. In announcements throughout the morning, the BOJ offered to inject a record 18 trillion yen into money markets -- Y15 trillion in same-day funds through three separate operations, plus three trillion yen in repurchase agreements. The yen had spiked sharply upward in early trading on expectations of repatriation flows, but soon erased those gains and traded in a tight band from around 0100 GMT. As of 0450 GMT, the U.S. dollar was trading around Y82.12, up from an earlier low of Y80.60, the greenback's lowest level against the yen since Nov. 9. While repatriations would tend to buoy the yen, the BOJ liquidity injections, combined with signals from Japanese officials that they could intervene in currency markets if necessary, kept the U.S. dollar supported for now. A strengthening yen could hurt Japan's export-dependent economy. Meanwhile, Chinese Premier Wen Jiabao, in closing remarks to China's annual legislative gathering, stressed that the yuan's appreciation must be gradual. Wen said the government needs to consider the impact on employment, business and overall social stability. That could point to a slower pace of appreciation, especially after China posted a trade surprise deficit of $7.3 billion in February. The dollar/yuan central parity rate was set Monday at $6.5701, vs 6.5750 on Friday. In Japan, Finance Minister Yoshihiko Noda said Monday morning that authorities will monitor yen levels for now. A senior Finance Ministry official warned Monday morning of the possibility of intervention to stem a strong yen rise. Authorities "will take decisive steps if necessary," he told reporters at the Finance Ministry.
World
Japan's yen surged against other major currencies Friday in New York after a devastating earthquake set off expectations that companies will repatriate yen to help pay for rebuilding efforts. Traders swiftly sold the yen just after the earthquake before reversing course. The dollar fell about 1.4% against the yen on the day, while the euro was down about 0.5% against the yen. "Speculation in advance of repatriation, that's what is driving the yen up right now," said Jeffrey Young, head of North American FX Research at Barclays Capital in New York. Traders are betting that insurers with exposure to Japan and companies based in the country will soon need to buy large quantities of yen to cover damages and pay out insurance claims. They would be forced to exchange foreign currencies for yen, further hurting the dollar, euro and other major units. But it is still too early to assess the extent of the damage and how much money may be needed to rebuild parts of the country that were destroyed by the earthquake and tsunami it triggered, leading to some uncertainty about longer term currency moves. "I'm personally not expecting a huge yen appreciation, but the net impact is probably negative for dollar/yen," said a portfolio manager at a London-based hedge fund. This source expects some Japanese firms to repatriate cash, but only gradually - and he doesn't expect a massive flow of yen back into Japan. The long-term effects on Japan's economy and the yen were still not known. But Moody's Investors Service said it was highly unlikely the country's debt rating would be affected by the earthquake.
Senin, 14 Maret 2011
FOREX INTRADAY SNAPSHOT
EUR/USD
Extends the strong recovery off 1.3752 to bring the 1.4000 level back into focus. This rally keeps the dominant uptrend intact, and a break through 1.3988 would re-open last week's high at 1.4036, threatening further gains towards the 1.4100 level. The 1.3860 area will look to contain weakness, to protect the 1.3752 low.
GBP/USD
Stages a corrective recovery off 1.5978 towards 1.6125. However, the 50% Fibonacci retracement level of the 1.6344/1.5978 setback at 1.6160 is likely to limit corrective strength. Friday's weakness confirmed a bull failure at the 1.6344 high, and a return to retest the 1.5978 low cannot be ruled out. Only a sustained break above 1.6160 would lift the tone.
USD/JPY
Drifts lower off 82.46 to put pressure on support at 82.04. Further weakness is expected to retrace the rally off the current session's 2011 low at 80.60, exposing 81.79 and the 81.53 area, which incorporates both a 1.618 Fibonacci extension target and the 50% Fibonacci retracement level. A push above 82.22 is required to lift the tone and open the 82.46 high.
AUD/USD
Friday's powerful bullish outside day gives the near-term a positive tone, and a retest of resistance at 1.0164 is expected. The Mar. 1 reaction high at 1.0203 is also vulnerable, and the threat is for further gains towards the key December 2010 reaction high at 1.0258. Corrective weakness will attract support while above 1.0015, and only below there would Friday's low at 0.9960 be exposed again.
FOREX FOCUS
Buying time was never a good idea for the euro and now it looks as if time has run out. For months, the single currency has found support, not only from hopes that the European Central Bank will remain hawkish on monetary policy but also from hopes that European Union leaders would come up with a longer-term solution to the sovereign-debt crisis. However, the longer the leaders have waited to negotiate a compromise between the 'peripheral' debtors and the core countries, the more difficult the whole process has become. Instead of the passing months bringing an economic upturn that would ease the financial stresses, the gap between the richer and the poorer countries has widened and political positions on both sides have more than just hardened. In the case of Ireland, the government has fallen and in Germany a new law could be passed by the Bundestag next week that will further limit Chancellor Angela Merkel's ability to negotiate. The gradual realization in the global investment community that the debt problems of the euro zone could still get worse can be tracked through the steady rise in the cost of insuring the debts of peripheral debtors as well as even some of the core countries. As EU leaders gather in Brussels for their latest round of talks on the issue, the rise in Portuguese bond yields close to their record highs suggest just how much disappointment in the political process has been built in to financial markets. So far, the euro itself has performed remarkably well, rising against the dollar for most of this year both on hopes that the politicians will pull some last-minute rabbit out of the hat and that the hawkish ECB will start raising interest rates, making the euro more attractive, as early as next month. This has helped push the single currency up to just under $1.40.
EUROPE
The yen stabilized in European trading Monday, after the Bank of Japan took unprecedented steps to boost market liquidity following Friday's earthquake and tsunami. Meanwhile, the euro remained well supported against the dollar after news over the weekend that euro-zone leaders agreed to expand their temporary bailout fund to EUR500 billion. Data-wise, euro-zone industrial production data are due for release at 1000 GMT. Markets are also set to keep a close eye on the meeting of euro-zone finance ministers and the ongoing situation in Japan and Libya.
ASIA
The yen stabilized Monday morning in Asia after a choppy start to the day, as the Bank of Japan took unprecedented steps to boost market liquidity following Friday's earthquake and tsunami. In announcements throughout the morning, the BOJ offered to inject a record 18 trillion yen into money markets -- Y15 trillion in same-day funds through three separate operations, plus three trillion yen in repurchase agreements. The yen had spiked sharply upward in early trading on expectations of repatriation flows, but soon erased those gains and traded in a tight band from around 0100 GMT. As of 0450 GMT, the U.S. dollar was trading around Y82.12, up from an earlier low of Y80.60, the greenback's lowest level against the yen since Nov. 9. While repatriations would tend to buoy the yen, the BOJ liquidity injections, combined with signals from Japanese officials that they could intervene in currency markets if necessary, kept the U.S. dollar supported for now. A strengthening yen could hurt Japan's export-dependent economy. Meanwhile, Chinese Premier Wen Jiabao, in closing remarks to China's annual legislative gathering, stressed that the yuan's appreciation must be gradual. Wen said the government needs to consider the impact on employment, business and overall social stability. That could point to a slower pace of appreciation, especially after China posted a trade surprise deficit of $7.3 billion in February. The dollar/yuan central parity rate was set Monday at $6.5701, vs 6.5750 on Friday. In Japan, Finance Minister Yoshihiko Noda said Monday morning that authorities will monitor yen levels for now. A senior Finance Ministry official warned Monday morning of the possibility of intervention to stem a strong yen rise. Authorities "will take decisive steps if necessary," he told reporters at the Finance Ministry. A separate government official told Dow Jones Newswires that he was concerned about speculative moves in the yen. Some investors seem to "want to push the yen higher at all costs," he said.
WORLD
Japan's yen surged against other major currencies Friday in New York after a devastating earthquake set off expectations that companies will repatriate yen to help pay for rebuilding efforts. Traders swiftly sold the yen just after the earthquake before reversing course. The dollar fell about 1.4% against the yen on the day, while the euro was down about 0.5% against the yen. "Speculation in advance of repatriation, that's what is driving the yen up right now," said Jeffrey Young, head of North American FX Research at Barclays Capital in New York. Traders are betting that insurers with exposure to Japan and companies based in the country will soon need to buy large quantities of yen to cover damages and pay out insurance claims. They would be forced to exchange foreign currencies for yen, further hurting the dollar, euro and other major units. But it is still too early to assess the extent of the damage and how much money may be needed to rebuild parts of the country that were destroyed by the earthquake and tsunami it triggered, leading to some uncertainty about longer term currency moves. "I'm personally not expecting a huge yen appreciation, but the net impact is probably negative for dollar/yen," said a portfolio manager at a London-based hedge fund. This source expects some Japanese firms to repatriate cash, but only gradually - and he doesn't expect a massive flow of yen back into Japan. The long-term effects on Japan's economy and the yen were still not known. But Moody's Investors Service said it was highly unlikely the country's debt rating would be affected by the earthquake. Japan is trying to emerge, like much of the world, from an economic downturn. Analysts said money spent to rebuild the parts of the country affected by the earthquake and tsunami could spur growth. However, it could add to the country's already high debt burden.
Extends the strong recovery off 1.3752 to bring the 1.4000 level back into focus. This rally keeps the dominant uptrend intact, and a break through 1.3988 would re-open last week's high at 1.4036, threatening further gains towards the 1.4100 level. The 1.3860 area will look to contain weakness, to protect the 1.3752 low.
GBP/USD
Stages a corrective recovery off 1.5978 towards 1.6125. However, the 50% Fibonacci retracement level of the 1.6344/1.5978 setback at 1.6160 is likely to limit corrective strength. Friday's weakness confirmed a bull failure at the 1.6344 high, and a return to retest the 1.5978 low cannot be ruled out. Only a sustained break above 1.6160 would lift the tone.
USD/JPY
Drifts lower off 82.46 to put pressure on support at 82.04. Further weakness is expected to retrace the rally off the current session's 2011 low at 80.60, exposing 81.79 and the 81.53 area, which incorporates both a 1.618 Fibonacci extension target and the 50% Fibonacci retracement level. A push above 82.22 is required to lift the tone and open the 82.46 high.
AUD/USD
Friday's powerful bullish outside day gives the near-term a positive tone, and a retest of resistance at 1.0164 is expected. The Mar. 1 reaction high at 1.0203 is also vulnerable, and the threat is for further gains towards the key December 2010 reaction high at 1.0258. Corrective weakness will attract support while above 1.0015, and only below there would Friday's low at 0.9960 be exposed again.
FOREX FOCUS
Buying time was never a good idea for the euro and now it looks as if time has run out. For months, the single currency has found support, not only from hopes that the European Central Bank will remain hawkish on monetary policy but also from hopes that European Union leaders would come up with a longer-term solution to the sovereign-debt crisis. However, the longer the leaders have waited to negotiate a compromise between the 'peripheral' debtors and the core countries, the more difficult the whole process has become. Instead of the passing months bringing an economic upturn that would ease the financial stresses, the gap between the richer and the poorer countries has widened and political positions on both sides have more than just hardened. In the case of Ireland, the government has fallen and in Germany a new law could be passed by the Bundestag next week that will further limit Chancellor Angela Merkel's ability to negotiate. The gradual realization in the global investment community that the debt problems of the euro zone could still get worse can be tracked through the steady rise in the cost of insuring the debts of peripheral debtors as well as even some of the core countries. As EU leaders gather in Brussels for their latest round of talks on the issue, the rise in Portuguese bond yields close to their record highs suggest just how much disappointment in the political process has been built in to financial markets. So far, the euro itself has performed remarkably well, rising against the dollar for most of this year both on hopes that the politicians will pull some last-minute rabbit out of the hat and that the hawkish ECB will start raising interest rates, making the euro more attractive, as early as next month. This has helped push the single currency up to just under $1.40.
EUROPE
The yen stabilized in European trading Monday, after the Bank of Japan took unprecedented steps to boost market liquidity following Friday's earthquake and tsunami. Meanwhile, the euro remained well supported against the dollar after news over the weekend that euro-zone leaders agreed to expand their temporary bailout fund to EUR500 billion. Data-wise, euro-zone industrial production data are due for release at 1000 GMT. Markets are also set to keep a close eye on the meeting of euro-zone finance ministers and the ongoing situation in Japan and Libya.
ASIA
The yen stabilized Monday morning in Asia after a choppy start to the day, as the Bank of Japan took unprecedented steps to boost market liquidity following Friday's earthquake and tsunami. In announcements throughout the morning, the BOJ offered to inject a record 18 trillion yen into money markets -- Y15 trillion in same-day funds through three separate operations, plus three trillion yen in repurchase agreements. The yen had spiked sharply upward in early trading on expectations of repatriation flows, but soon erased those gains and traded in a tight band from around 0100 GMT. As of 0450 GMT, the U.S. dollar was trading around Y82.12, up from an earlier low of Y80.60, the greenback's lowest level against the yen since Nov. 9. While repatriations would tend to buoy the yen, the BOJ liquidity injections, combined with signals from Japanese officials that they could intervene in currency markets if necessary, kept the U.S. dollar supported for now. A strengthening yen could hurt Japan's export-dependent economy. Meanwhile, Chinese Premier Wen Jiabao, in closing remarks to China's annual legislative gathering, stressed that the yuan's appreciation must be gradual. Wen said the government needs to consider the impact on employment, business and overall social stability. That could point to a slower pace of appreciation, especially after China posted a trade surprise deficit of $7.3 billion in February. The dollar/yuan central parity rate was set Monday at $6.5701, vs 6.5750 on Friday. In Japan, Finance Minister Yoshihiko Noda said Monday morning that authorities will monitor yen levels for now. A senior Finance Ministry official warned Monday morning of the possibility of intervention to stem a strong yen rise. Authorities "will take decisive steps if necessary," he told reporters at the Finance Ministry. A separate government official told Dow Jones Newswires that he was concerned about speculative moves in the yen. Some investors seem to "want to push the yen higher at all costs," he said.
WORLD
Japan's yen surged against other major currencies Friday in New York after a devastating earthquake set off expectations that companies will repatriate yen to help pay for rebuilding efforts. Traders swiftly sold the yen just after the earthquake before reversing course. The dollar fell about 1.4% against the yen on the day, while the euro was down about 0.5% against the yen. "Speculation in advance of repatriation, that's what is driving the yen up right now," said Jeffrey Young, head of North American FX Research at Barclays Capital in New York. Traders are betting that insurers with exposure to Japan and companies based in the country will soon need to buy large quantities of yen to cover damages and pay out insurance claims. They would be forced to exchange foreign currencies for yen, further hurting the dollar, euro and other major units. But it is still too early to assess the extent of the damage and how much money may be needed to rebuild parts of the country that were destroyed by the earthquake and tsunami it triggered, leading to some uncertainty about longer term currency moves. "I'm personally not expecting a huge yen appreciation, but the net impact is probably negative for dollar/yen," said a portfolio manager at a London-based hedge fund. This source expects some Japanese firms to repatriate cash, but only gradually - and he doesn't expect a massive flow of yen back into Japan. The long-term effects on Japan's economy and the yen were still not known. But Moody's Investors Service said it was highly unlikely the country's debt rating would be affected by the earthquake. Japan is trying to emerge, like much of the world, from an economic downturn. Analysts said money spent to rebuild the parts of the country affected by the earthquake and tsunami could spur growth. However, it could add to the country's already high debt burden.
Minggu, 27 Februari 2011
FOREX INTRADAY SNAPSHOT
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%
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%
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.
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