Eurozone in Focus, Risk Off
U.S. Dollar Trading (USD) Stocks and risk assets were sold all day yesterday with the Greece political talks seen doomed to fail and investors waiting on the sidelines waiting the fallout. Traders talk that rating agencies are also reviewing the situation and the impact on European banks and other nations. A lot of US Data tonight will set the next direction for the market. Looking ahead, April Retail Sales forecast at 0.2% vs. 0.8% previously. April CPI forecast 2.3% vs. 2.7% y/y.
The Euro (EUR) the EUR/USD broke 1.2900 at the open in Asia as it looked like there will be no Greece deal over the Weekend and the selling continued overnight as ministers in Europe noted that Greece can leave the EU and that no aid will be coming unless a government is formed. EUR/GBP was big news break below the 0.8000 in multiyear new lows. EUR/USD is grinding lower but very slowly with techs noting 1.2700 the bear’s target. The Sterling (GBP) ignored a lot of the EUR/USD selling as the cross broke 0.8000 but the topside was limited while stocks are so weak. The recent Pound rally has surprised some fundamental analysts but the UK is looking the best of the worst lately with its tough budgets and AAA rating. Looking ahead, Q1 German GDP forecast at 0.8% vs. 1.5% previously. March UK Trade Balance forecast at -8.4bn vs. -8.7bn previously.
The Japanese Yen (JPY) the Yen was in demand being bought across the board and was the strongest currency on Monday. USD/JPY fell from a small foray above Y80 in Asia to Y79.70 in the US session before stabilizing in the now familiar Y79.50-Y80 range. EUR/JPY fell another leg to Y102.20 and AUD/JPY broke below Y80 as the selling continued. Australian Dollar (AUD) the AUD/USD broke parity in Asia to little fanfare only falling to 0.9950 overnight with the market very subdued and selling gentle. The outlook is for further losses with many targeting 0.9800 but the oversold US stock market suggest a short squeeze will be on the cards at some point this week. Looking ahead, May RBA Rate Meeting Minutes.
Oil & Gold (XAU) XAU/USD fell sharply on banking concerns with demand for cash high. Support was eventually seen at $1555. OIL/USD continued to be sold off breaking $95 and falling to $93.
Pairs to watch
EUR/USD oversold good news to inspire bounce?
EUR/GBP broke 0.8000 time for respite rally?
TECHNICAL COMMENTARY
|
Currency |
Sup 2 |
Sup 1 |
Spot |
Res 1 |
Res 2 |
|
EUR/USD |
1.2734 |
1.2800 |
1.2830 |
1.2940 |
1.3000 |
|
USD/JPY |
79.53 |
79.64 |
79.90 |
80.39 |
80.60 |
|
GBP/USD |
1.5995 |
1.6054 |
1.6095 |
1.6163 |
1.6199 |
|
AUD/USD |
0.9861 |
0.9950 |
0.9970 |
1.0000 |
1.0077 |
|
XAU/USD |
1500.00 |
1544 |
1559 |
1580 |
1607 |
|
OIL/USD |
92.50
|
93.00 |
94.30 |
95.00 |
96.50 |
By Anthony Darvall (TonyD)
French Downgrade Sparks Euro Sell off
Last week’s currency trading review
The Dollar was strong on the back of fresh Eurozone concerns with any attempts to rally being sold into and more bad news emerging daily. On Friday night S&P downgraded multiple European countries including France which lost its AAA rating. Data wise we saw a few negative misses which hampered the US stocks attempt to rally even as the debt crisis rolled on. Weekly jobless claims spiked to 399k vs. 375k previously. Consumer Sentiment improved though to 74 vs. 69.9 previously. The Euro was the main mover in the FX market with the S&P downgrades and Greece bailout jitters causing a broad sell off. EUR/AUD fell to all-time lows under 1.2300 and EUR/JPY fell to fresh 12 year lows at Y97. The outlook is still negative and only oversold technical helping to support. The EUR/USD is down -0.33% currently at 1.2676, after opening the week at 1.2712.
The Japanese Yen remained strong in the risk off market led by the EUR/JPY selling. AUD/JPY is the only exception with the strong support seen for the commodities and stocks helping to reverse most dips and the pair closed above Y79. USD/JPY is in a tight range and waiting for either US data to rally or EUR/JPY selling to push the major lower. The USD/JPY is down -0.03% currently at 76.94, after opening at 76.96. The GBP tracked the Euro broadly but was able to finish on a strong note on Friday as the EUR/GBP reversed to 0.8250 supports. The BOE held at 0.5% and kept the asset purchase program at 275b. The GBP/USD is down -0.69% currently at 1.5319 after opening at 1.5425. The AUD was able to decouple form the EUR/USD selling to rally on the back of strong stocks and gold. EUR/AUD extended all-time lows pushing down to 1.2250 and is showing no signs of reversing just yet. Traders are getting caught short as the usual correlation with the EUR/USD breaking down and instead trading the view the Aussie is an Asian currency. The AUD/USD is up +0.91% currently at 1.0320 after opening at 1.0226.
The Forex Trading Economic Data Ahead Preview
In the States; ON Tuesday, Bank of Canada Rate decision forecast to hold at 1.00%. On Wednesday, December Industrial Production forecast at 0.5% vs. -0.2% previously. On Thursday, December CPI forecast at 3.1% vs. 3.4% y/y previously. Weekly Jobless Claims are 389k vs. 399k previously. On Friday, December Existing Home Sales forecast at 5.2% vs. 4 % previously. We will provide our previews and reviews of these data releases in the daily summary.
In the Eurozone; On Tuesday, January German Survey forecast at -49.8 vs. -53.8 previously. In the UK, On Tuesday, December CPI forecast at 4.2% vs. 4.8% previously y/y. On Wednesday December Weekly Jobless Claims are forecast at 8k vs. 3k previously. We will provide our previews and reviews of these data releases in the daily summary.
In Japan; On Thursday, November Industrial Production previously at -4.0% y/y. In Australia; On Thursday, NZD Q4 CPI forecast at 0.4% vs. 0.4% previously. Also December Unemployment Rate forecast at 5.3%. December employment change forecast at 10k vs. -6k previously. Un We will provide our previews and reviews of these data releases in the daily summary.
TECHNICAL COMMENTARY
|
Currency |
Sup 2 |
Sup 1 |
Spot |
Res 1 |
Res 2 |
|
EUR/USD |
1.2588 |
1.2644 |
1.2645 |
1.2879 |
1.3080 |
|
USD/JPY |
76.00 |
76.58 |
76.80 |
77.74 |
78.98 |
|
GBP/USD |
1.5125 |
1.5272 |
1.5315 |
1.5410 |
1.5501 |
|
AUD/USD |
1.0044 |
1.0229 |
1.0280 |
1.0387 |
1.0567 |
|
XAU/USD |
1605.00 |
1630 |
1638 |
1662 |
1677 |
|
OIL/USD |
97.50
|
99.00 |
99.90 |
100.00 |
101.00 |
Euro – 1.2645
Initial support at 1.2644 (Sept 10 2010 low) followed by 1.2588 (Aug 24 2010 low). Initial resistance is now located at 1.2879 (Jan 13 high) followed by 1.3080 (Dec 28 high)
Yen – 76.80
Initial support is located at 76.58 (Nov 18 low) followed by 76.00 (Big Figure). Initial resistance is now at 77.74 (Dec 30 high) followed by 78.98 (Nov 1 high).
Pound – 1.5315
Initial support at 1.5272 (Aug 6 low) followed by 1.5125 (Jul 21 2010 low). Initial resistance is now at 1.5410 (Jan 6 high) followed by 1.5501 (Jan 10 high).
Australian Dollar – 1.0280
Initial support at 1.0229 (Jan 10 low) followed by the 1.0044 (Dec 29 low). Initial resistance is now at 1.0387 (Jan 3 low) followed by 1.0567 (Mar 3 high).
Gold – 1638
Initial support at 1630 (Jan 11 low) followed by 1605 (Jan 9 low). Initial resistance is now at 1662 (50% retrace of 1802.93-1522.65) followed by 1677 (Dec 13 high).
Oil – 99.90
Initial support at 99.00 (Intraday Support) followed by 97.50 (Intraday Support). Initial resistance is now at 100.00 (Intraday resistance) followed by 101.00 (Intraday Resistance).
Written by Anthony Darvall
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