Euro steadied ahead of the EU summit

• The dollar paused its rally on Thursday as US Treasury prices edged higher. On Wednesday, the US dollar rose against a basket of currencies supported by rising US Treasury yields. Jobless Claims and Manufacturing index are expected later today.
• The euro appears steadied on Thursday’s European trade after it plummeted on Wednesday weighed by rating agency Moody’s which said it was considering downgrading Spain’s sovereign debt. EU leaders are discussing a persistent debt crisis and possible methods to prevent a euro zone debt contagion in an end of year meeting on Thursday and Friday. The single currency is trading in a tight range between 1.3200-1.3233 versus the dollar well below a three week high of 1.3497 hit on Tuesday. The pair is currently trading at 1.3233 dollars.
• Higher US Treasury yields pushed the dollar up to three-month highs versus the Japanese Yen on Wednesday hitting 84.50. USD/JPY is now trading at 84.22 yen. The Swiss franc fell on Thursday ahead of Switzerland’s interest rate decision.

Currency to watch out for: EURUSD & USDJPY

• § The EURUSD pivot point is at 1.3275 with a preference to enter into Short positions at 1.3265
• § The USDJPY pivot point is at 83.90 with a preference to enter Long positions at 83.95

Today’s calendar and market movers:

• § Switzerland’s Interest Rate decision
• § UK Retail Sales in November is forecasted at 0.5%
• § US Initial Jobless Claims is forecasted at 425K
• § US Fed Manufacturing Index for December is forecasted at 14.1

Equity Markets:

US equities closed down on Wednesday with the S&P500 at -0.51% and the DJIA down at -0.17%. The European bourses traded down as well with the FTSE traded down -0.51% the DAX and the CAC down at -0.16% and -0.58% respectively. The NIKKEI and the HSI at the time of writing is trading at 0.01% and -0.58% respectively.

Source: Easy Forex

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USD in a trading range as US observes Thanks Giving!

• The Dollar Traded quietly during yesterdays US market holiday. The majors traded inside recent ranges with little fresh news to move the markets beyond. Risk aversion took a small break during the day however as the Asian session begun risk aversion trickled back in the market once again pushing the EURUSD back to its lows.  In Asia the focus was on the Korean peninsula standoff which dampened appetite further. US stocks remained unchanged yesterday due to Bank Holiday for Thanks Giving.
• The Euro (EUR) was able to find support at the 1.3300 level with ECM Member Weber stating the Euro is a long term project and that it was possible to increase the size of the EU bailout fund. Euro zone Government Bonds continue to be under pressure with Spanish and Portugal yields rising. EUR/USD traded with a low of 1.3285 and a high of 1.3389 before closing at 1.3335. Looking ahead, German October Import Prices forecast at 0.1% vs. 0.3% previously.

Currency to watch out for: EURUSD & USDJPY

• § The EURUSD pivot point is at 1.3280 with a preference to enter into Long positions at 1.3290
• § The USDJPY pivot point is at 83.50 with a preference to enter Long positions at 83.90

Today’s calendar and market movers:

• § Switzerland KOF Indicator for November forecasted at 2.1
• § Canada Budget Balance for September is out with previous month -5.81 bio

Equity Markets:

• US equities were closed yesterday with a market holiday. The European bourses were positive with the FTSE up at 0.74% the DAX and the CAC closing up at 0.82% and at 0.34% respectively. The NIKKEI and the HSI at the time of writing is -0.4% and -0.98% respectively.

Source: Easy Forex

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US Market holiday focus on EU peripheral spreads!

• The U.S. Dollar Traded stronger as risk aversion crept back into the market on continual growing unease with some European countries Debt issues. The G20 has failed to produce much as of yet but markets are watching closely for any friction particularly on US FED Monetary Policy. In US stocks the DJIA traded down -73 points closing at 11283 and the S&P traded  down -5 points closing at 1213 and NASDAQ -23 points closing at 2555. Looking ahead, November UoM Consumer Confidence is forecast at 63.5 vs. 61.9.The Euro was sensitive yesterday to European wide market  talk of EU-Irish bailouts and bondholders having to bear the pain in any cost of bailouts. Stocks were also under pressure as  the Euro pushed lower towards 1.3600 and the market s positioning increasingly grew with a bearish bias. EUR/USD traded with a low of 1.3607 and a high of 1.3822 before closing at 1.3650. Looking ahead, Q3 GDP forecast at 0.4% Q/Q, 1.9% Y/Y.

Currency to watch out for: EURUSD & USDJPY

• § The EURUSD pivot point is at 1.3680 with a preference to enter into Short positions at 1.3670
• § The USDJPY pivot point is at 82.10 with a preference to enter Long positions at 82.12

Today’s calendar and market movers:

• § Germany GDP Q3 expected at 0.7%
• § Euro Zone GDP for Q3 expected at 0.4% 

Equity Markets:

• US equities closed negative yesterday with the S&P500 at -0.42 % and the DJIA at -0.65%. The European bourses were mixed with the FTSE down -0.03% the DAX and the CAC closing down up at 0.05% and down at -0.54% respectively. The NIKKEI and the HSI at the time of writing is -1.39% and -1.62% respectively.

Source: Easy Forex

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G20 Agrees to disagree on fiscal consolidation!

• Markets traded cautiously on Friday and the USD softer on Friday as Q1 GDP was revised to 2.7% from earlier 3.0% estimates. Markets on Friday were sidelined as trader’s squared positions ahead of the weekend G20 meeting. The agenda at the G20 was fiscal consolidation however fear arose as countries varied in their opinion on the matter. Countries such as the US for e.g. favored growth policies and want to avoid fiscal cuts as it would put the fragile recovery in to jeopardy. On the other side of the Atlantic however we had countries such as Germany promoting fiscal consolidation saying that it will bring confidence to the markets and restore trust between counter parties. As the G20 came to an end however we had brilliant communiqué from the G20 as all countries agreed to disagree. All members agreed that growth is their main policy however the agreed different countries must consider their individual circumstances and must be flexible in deciding when to cut their deficits. The markets seemed to have taken a liking to the communiqué and risk appetite has picked up since. USDJPY price action was between 89.76 – 89.21.
• In the Europe we had ECB executive board member Tumpel-Gugerell say that Europe’s economic recovery is on track and that fiscal consolidation may have positive longer term affects as it will increase confidence in the markets. He also noted that if the EU bank stress tests show that banks require more capital than it can be raised either via private or public sector funds. In Greece we had agreement over a pension reform plan which will be a significant reduction to Greece is deficit reduction plans. EURUSD price action was between 1.2467 – 1.2207.

Currency to watch out for: EURUSD & USDJPY

• § The EURUSD pivot point is at 1.2320 with a preference to enter into Long positions at 1.2330
• § The USDJPY pivot point is at 89.20 with a preference to enter Long positions at 89.25

Today’s calendar and market movers:

• § Germany Consumer Price Index m/m June expected at 0.1%
• § United States Core PCE for May m/m expected at 0.1%

Equity Markets:

• US equities closed mixed yesterday with the S&P500 down by 0.29% and the DJIA down by -0.09%. The European bourses were negative yesterday with the FTSE down -1.05% the DAX and the CAC closing at -0.73% and -1.00% respectively. The NIKKEI and the HSI at the time of writing is -0.45% and 0.35% respectively.

Source: Easy Forex

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Gold surges, equities fall as risk aversion picks up!

• Markets yesterday traded with caution once again with the US equity markets finishing the session below -1.15% and gold approached last month’s record highs to $1245. The VIX, a gauge of fear, traded above 3% to 36.6 as the overall market uncertainty as to developments in Europe and US economic recovery are causing many market participants to purchase insurance in the form of options against future adverse movements in most assets. The only economic data released out of the US on the day was the consumer credit report which showed an increase of $1 bio. We also heard some comments from soon to be Federal Reserve Vice Chairman Janet Yellen saying that ”significant; headwinds to stability remain”. USDJPY price action yesterday was between 91.00 – 92.07.
• In Europe we saw continuous declines in equity and currency markets following the previous days shocking comments from Hungarian officials about the possibility of default. From the financial calendar we had a much stronger than expected factory orders report jumping 2.8% for the month as well as a successful bond auction by the Dutch and Belgian treasury.  This shows that the market still segregates between Northern and Southern countries and that Northern EU members have not experienced any significant rise in the cost of financing their debt. EURUSD price action yesterday was between 1.1991 – 1.1875.

Currency to watch out for: EURUSD & USDJPY

• § The EURUSD pivot point is at 1.1990 with a preference to enter into Short positions at 1.1980
• § The USDJPY pivot point is at 91.85 with a preference to enter Short positions at 91.80

Today’s calendar and market movers:

• § Germany Industrial Output for the month of April expected at 0.8%
• § Canada Housing Starts for May expected at 200K
• § US Redbook for the week, previous months reading was 0.3%

Equity Markets:

• US equities closed negative yesterday with the S&P500 down by -1.35% and the DJIA down by -1.16%. The European bourses were negative yesterday with the FTSE down -1.11% the DAX and the CAC closing at -0.57% and -1.21%. The NIKKEI and the HSI at the time of writing is 0.18% and 0.35% respectively.

Source: Easy Forex

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Consumer confidence surprises the market coming at 57.7!

• Markets yesterday were of the V variety across the board. Equity markets along with risk currencies started the day with eerie risk aversion building momentum as fears from the Spanish banking sector continued to weigh on the markets. We also saw a lack of unity between European member states as Germany was against the issuance of a joint EUR bond as it would ”reward states pursuing wrong policies”. Reports also surfaced that Germany’s Finance Ministry is proposing an extension on the short selling ban in Germany to more securities. From the financial calendar however we saw industrial orders come in at a 5.2% increase and the ECB announced that it will absorb EUR 2.6bio in one week fixed term deposits. EURUSD price action was between 1.2177 – 1.2386.
• In the US we had the FOMC minutes show that 3 regional Fed banks are in favor of the first rate hike by 25bp to 1% as it would restore the pre crisis discount rate structure. The highlight of the day however was the Consumer confidence index which beat expectations in May and came in at 63.3 compared to an expectation of 57.7 effectively the equity markets erased all loses and closed at 0.04%. We also had a good Case Shiller (S&P) which came in at 0.3% growth for the month. USDJPY price action yesterday was between 89.25 – 90.48.
• In the UK we saw the release of the quarterly GDP report which showed a 0.3% growth meeting expectations. There was a reduction in government spending by 0.5% for the quarter and private consumption was flat. Price action in the pound yesterday was between 1.4258 – 1.4448.

Currency to watch out for: EURUSD & USDJPY

• § The EURUSD pivot point is at 1.2400 with a preference to enter into Short positions at 1.2390
• § The USDJPY pivot point is at 89.90 with a preference to enter Long positions at 89.95

Today’s calendar and market movers:

• § US Durable Goods Orders for April is forecasted at 1.3%
• § New Home Sales for April is expected at 0.43 mio
• § US Crude Oil inventories for the week expected at 0.2 mio

Equity Markets:

• US equities closed mixed yesterday with the DJIA and the SP500 closing -0.23%% and 0.04% respectively.  The European bourses were negative yesterday with the FTSE closing -2.54% the DAX and the CAC closing down at -2.34% and -2.90%. The NIKKEI and the HSI at the time of writing is 0.78% and 1.20% respectively.

Source: Easy Forex

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• USD: Lower, Yellen appointed to the Fed, retail sales post unexpected rise, consumer sentiment dips
• JPY: Lower, BOJ may double QE, threat of intervention
• EUR: Higher, Greek debt fears fade, talk of German/French Greek rescue package, industrial output surged
• GBP: Higher, house prices jump, Conservatives expand lead in the polls
• CAD and AUD: AUD mixed & CAD higher, Canada’s employment growth beats expectations

Overview

The USD traded at a three week low Friday pressured by announcement that President Obama will nominate Janet Yellen as vice chair of the Federal Reserve. Yellen is a policy dove and her appointment will likely mean that the Fed will keep interest rates low for much of 2010. USD was also pressured by improving risk appetite as global equity markets rally. The EUR traded higher supported by diminishing concern about the Greek debt crisis and in reaction to report that Germany and France may be considering a $55bln rescue plan for Greece. GBP traded higher supported by report of a jump in UK house prices. Commodity currencies traded higher supported by stronger equity markets and improving risk sentiment with CAD supported by report of stronger than expected Canadian employment and BOC rate hike speculation. AUD gains were limited by speculation the RBA will pause in April. JPY traded lower pressured by report that the BOJ may double the size of its quantitative ease to ¥20trln and in reaction to increasing threat of BOJ intervention. US economic data was mixed with retail sales reported stronger than expected, Michigan consumer confidence posted a slight drop. Business inventories were unchanged. USD came off its lows as US equities turned lower after the release of today’s data. Focus turns to next weeks Fed policy meeting on March 16th. No Fed policy change is expected. Investors will be looking to see whether the Fed makes any changes in its policy statement in regard to the language of “extended period” for low rates.

Today’s US data:
February retail sales rose 0.3%, a reading of -0.2% was expected. Ex. autos retail sales rose 0.8%. March Michigan sentiment came in at 72.5, a reading of 73.6 was expected. January business inventories were unchanged with sales up 0.6%.

Upcoming US data:
Next week’s US economic calendar includes the March 15th release of March Empire State Manufacturing expected at 22 compared to 24.9 last month along with February industrial production, capacity use and March NAHB index. Industrial production is expected to rise by 0.1% compared to 0.9% last month. Capacity use is expected unchanged at 72.6. The NAHB Index is expected unchanged at 17. On March 16th February housing starts and building permits will be released along with February import prices. Housing starts are expected at 580k compared to 591k last month and building permits are expected at 610k compared to 621k last month. Import prices are expected flat. On March 17th February PPI will be released expected at -0.2% compared to 1.4% last month. On March 18th February CPI will be released expected at 0.1% compared to 0.2% last month. Q4 current account, initial jobless claims for week ending 03/13, leading indicators for February and March Philly Fed will also be released on March 18th. The current account is expected at -120bln compared to -108bln last quarter. Initial claims are expected at 457k compared to 462k last week. Leading indicators are expected to rise by 0.2% compared to 0.3% last month. Philly Fed is expected at 18 compared to 17.6 last month.

JPY
JPY traded lower pressured by firmer equity market trade, report that the BOJ may ease policy next week and by increasing threat of intervention. JPY downside was limited by repatriation flows ahead of Japan’s fiscal year end on March 31st and news of the appointment of Janet Yellen to the Federal Reserve Board. The Yellen appointment increases the odds that the Fed will maintain low interest rates throughout 2010 as she is seen as a policy dove. JPY experienced initial selling pressure in reaction to a Nikkei report that the BOJ may double the size of its quantitative ease at next week’s policy meeting to ¥20trln. JPY was also pressured by increasing risk of intervention. Japan’s PM said that Japan is ready to act if JPY moves sharply. Analysts at Morgan Stanley suggest that Japan is likely to intervene soon and sell JPY. Japan’s Finance Minister Kan said excessive JPY strength is undesirable but the value of the JPY should be decided by the markets as long as the rate is stable. Kan went on to say that intervention can be used against excessive Forex price moves. Japan’s economic data was generally positive with January industrial production revised up to 2.7% from 2.5% in the preliminary report and capacity utilization rose by 3.9%. JPY turned lower for the day after the release of stronger than expected US retail sales. Focus turns to next week’s BOJ policy meeting on March 16th and 17th.

Next week’s Japanese economic calendar includes the March 17th release of January tertiary activity expected at 0.4% compared to -0.9% last month. On March 18th January revised leading indicators will be released expected 2.5% compared to 3.8% in the original report. On March 19th January all industry activity will be released expected at 0.8% compared to -0.3% last month.

Key technical levels to watch in USD/JPY include support at 90.17 the March 12th low with resistance at 91.30 the February 23rd high.

EUR
EUR traded higher supported by improving risk sentiment sparked by BOJ ease speculation, speculation that the appointment of Janet Yellen to the Fed will encourage the Fed to maintain low yields throughout 2010 and in reaction to a surge in EU industrial output. Last month Yellen said that the US economy still needs extraordinarily low rates. EU economic data was positive with January industrial output reported to have surged by 1.7%. This was the biggest monthly surge in EU industrial production in almost 20 years. EUR was supported by gains in cross trade to the JPY with JPY pressured by BOJ ease speculation. EUR was also supported by diminished concern about the Greek fiscal crisis and a report that Germany and France may be considering a $55bln rescue plan for Greece. There is a growing sense that the Greek debt crisis may have passed. Sovereign debt risks in Europe remain and are likely to resurface in the future. This means that diminished concern about Greece may not last. A number of analysts are looking for a short-term rally in the EUR and a test of 1.4000 as focus shifts to improving risk sentiment and the risk of an imminent Greek debt default have significantly diminished.

Next week’s EU economic calendar includes the March 15th release of Q4 employment expected at -0.4% compared to -0.5% percent last month. On March 16th EU ZEW index for March will be released expected at 44.8 compared to 45.1 last month along with February HICP expected at -1.4% compared to -1.3% last month. On March 17th EU Q4 labor costs and wages will be released expected at 3.3% and 3% respectively. On March 18th EU January current account will be released expected at 9.1bln compared to 9.4mln last month. EU January foreign trade also be released on March 18th expected at 3.8bln compared to 4.4bln last month.

The technical outlook for the EUR is mixed as support holds above 1.3600. Expect EUR support at 1.3620 the March 11th low with resistance at 1.3840.

GBP
GBP traded higher supported by report of a sharp jump in UK house prices and UK election polls which indicate that the Conservative lead over Labor is growing. Research Academetrics Ltd. said that UK house prices rose at their fastest pace in seven years in February. The rise in UK house prices follows Thursday’s report that UK inflation expectations rose to a two-year high. These reports may discourage speculation that the BOE will expand its asset purchases and with a significant large short position in GBP, GBP may be ripe for a technical rally. The latest UK election poll shows that the Conservative party has a 13 point lead over Labor. The Conservative party has pledged to take action to reduce the UK deficit. If the conservative party can gain majority control of the parliament it would reduce the odds of a hung parliament and increase the odds of the UK government taking action to reduce UK government debt. Tuesday the Fitch rating agency said that the UK must take faster action to reduce its deficit or risk a downgrade of the UK this was credit rating. The UK election is expected to be held on May 6th. GBP has been underperforming because of concern about the UK economy and election uncertainty. Today’s UK house price data and election polls may help to reduce some of the concern about the UK election and UK recovery. Focus turns to Wednesday’s release of the BOE policy minutes for the March policy meeting. The trade will be looking at the minutes for clues to whether the BOE is considering a change in its asset purchases.

Next week’s UK economic calendar includes the March 17th release of January unemployment weekly earnings and the February claimant count. Unemployment is expected at 7.9% compared to 7.8% last month with the average earnings unchanged at 0.8% and claimant count at 27k compared 23.5k last month. BOE policy minutes will be released on Wednesday. On March 18th February money supply and public-sector borrowing will be released. Money supply is expected at 0.8% compared 0.6% last month. Net public-sector borrowing is expected -13bln compared to -11.7bln last month. Also on March 18th March CBI orders will be released expected at -34 compared to -36 last month.

The technical outlook for GBP is mixed as GBP trades back above 1.5000. Expect near-term support at 1.5027 the March 12th low with resistance at 1.5327 the February 26h high

CAD
CAD traded at its highest level versus the USD since July of 2008 supported by report of stronger than expected Canadian employment data, improving risk sentiment as equity markets rally and in reaction to speculation that the Fed will maintain low yields for an extended period in light of today’s appointment of Janet Yellen to the Federal Reserve board. Canada created 22,900 new jobs in February and the unemployment rate declined to 8.2% from 8.3%. The trade had expected Canada to create just 15k new jobs with the unemployment rate expected to be unchanged. Stronger Canadian employment growth follows recent Canadian economic reports which show increased manufacturing activity and higher inflation. Improving economic outlook in Canada  will increase pressure on the BOC to consider an earlier rate hike. CAD has been outperforming supported by last week’s decision by the BOC to maintain steady monetary policy and signal a shift in its policy bias. In the BOC policy statement the BOC dropped reference to inflation risks being to the downside. This has encouraged speculation that the BOC may hike interest rates sooner than the Fed. The appointment of Yellen to the Fed may increase speculation that the BOC will act on rates before the Fed. A BOC rate hike could come as early as August. CAD is expected to test parity to the USD in the weeks ahead. As the CAD approaches parity it may increase the risk of verbal intervention from the BOC and Canadian officials. Canada’s Finance Minister Flaherty says he is always worried about CAD volatility.

Next week’s Canadian economic calendar includes the March 16th release of Q4 labor productivity expected at 0.1% compared to -0.2% last month. January manufacturing shipments will be released on March 16th expected at 1.3% compared to 1.6% last month. On March 17th January wholesale trade will be released expected at 0.4% compared to 0.7% last month. On March 18th January net foreign investment will be released expected at 8bln compared to 11.2bln last month. On March 19th January retail sales will be released expected at 0.7%% compared 0.4% last month.

The technical outlook for CAD is positive as USD/CAD trades below 1.0200. Look for near-term support at 1.0130 the July 25th low with resistance at 1.0248 the March 12th high.

AUD
AUD traded mixed despite improving risk sentiment and firmer commodity prices. AUD underperformed with gains limited by selling in cross trade to the CAD. CAD was supported by report of stronger than expected Canadian employment and BOC rate hike speculation. AUD gains were also limited by concern about the growth outlook in China. China announced additional measures to try and slow the pace of the real estate asset market appreciation. China raised the down payment requirement on real estate purchases to 50% of the purchase price to try and reduce the risk of a real estate bubble. Earlier in the week there were reports that China may be considering an earlier rate hike to try to slow what is perceived to be an overheating of the Chinese economy. Speculation about an earlier Chinese rate hike may dampen demand for the AUD because of concern the rate hike could hurt the global economic outlook. In addition, Chinese rate hike speculation could reduce the risk of the RBA hiking interest rates at next month’s policy meeting. The RBA paused in its rate hike cycle during February and attributed China’s efforts to curb lending as one reason for the pause. Last Tuesday, the RBA hiked interest rates 25bps to 4%. In the statement accompanying the RBA rate hike the RBA appeared to have a balanced outlook towards inflation, growth and future policy decisions. This has sparked speculation that the RBA may pause its rate hike cycle in April. The outlook for RBA policy will be key to the direction of the AUD. Thursday Australia reported that February unemployment rose by just 400 with unemployment unchanged at 5.3%. Slower Australian jobs growth may dampen RBA rate hike speculation. AUD price direction will remain linked to risk sentiment and the direction of equity markets.

Next week’s Australian economic calendar includes the March 17th release of Q4 dwelling unit starts expected at 7% compared to 9.4% last quarter.

The technical outlook for the AUD is positive as the AUD trades above 9100. Expect AUD support at 9056 the March 9th low with resistance at 9260.

Source: Easy Forex

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• USD: Lower, pressured by a recovery in global equity markets, Q4 GDP revised up, existing home sales drop
• JPY: Higher, factory output expands and retail sales jump, Yuan revaluation speculation
• EUR: Higher, inflation falls, gains in cross to GBP, short covering
• GBP: Lower, UK Q4 revised up, Q4 government spending higher than expected
• CAD and AUD: AUD & CAD higher, strong Australian credit demand, Canada’s C/A deficit narrows

Overview
The USD traded lower Friday pressured by a modest improvement in risk sentiment as equity markets rally in reaction to report of an upward revision in UK and US Q4 GDP, stronger industrial production and retail sales in Japan and strong private sector credit demand from Australia. USD was also pressured by Yuan revaluation speculation. Yuan forwards traded higher in reaction to a newspaper report that the Chinese government is assessing the potential impact of currency gains. US economic data was mixed with Q4 GDP revised higher, Chicago PMI came in higher than expected and Michigan sentiment was revised slightly lower. Existing home sales posted an unexpected sharp decline. Existing home sales are at a seven month low. USD remained on the defensive despite mixed US economic data as US equity markets trade both sides of settlement.

Focus turns to next week’s central bank policy meetings in Australia and Canada on Tuesday and the UK and EU on Thursday and Friday’s release of US February unemployment. The BOC is expected to maintain steady rate policy, the RBA is expected to hike rates 25 bps, the ECB is expected to remain on hold and there is uncertainty about whether the BOE will maintain its current level of asset purchases. US February unemployment is expected to post a modest rise with nonfarm payrolls unchanged from last month.

Today’s US data:
Q4 GDP revised up 0.2% to 5.9%, a reading of 5.7% was expected. February Chicago PMI came in at 62.6, a reading of 60 was expected. February Michigan consumer sentiment was revised to 73.6, a reading of 74 was expected. January existing home sales declined by 7.2% to 505k, a reading a 550k was expected.

Upcoming US data:
Next week’s US economic calendar includes March 1st release of January personal income and consumption. Personal income and consumption are expected to rise by 0.4%. January construction spending and the February ISM Index will also be released on March 1st. Construction spending is expected to decline by 0.7% compared to 1.2% decline last month. The ISM Index is expected at 58 compared to 58.4 last month. On March 2nd domestic auto sales will be released. On March 3rd February ADP employment will released expected at 10k compared to -22k last month. February manufacturing ISM Index will also be released on March 3rd expected at 51 compared to 50.5 last month. On March 4th initial jobless claims for week ending 02/27 will be released expected at 490k compared to 496k last month. Q4 productivity, unit labor costs, January pending home sales and factory orders will also be released on March 4th. Q4 productivity is expected unchanged at 6.2%, unit labor costs are expected unchanged at -4.4%, factory orders are expected unchanged at 1% and pending home sales are expected at 98.4 compared to 96.6 last month. On March 5th February unemployment and nonfarm payrolls will be released along with January consumer credit. The unemployment rate is expected to rise 0.1% to 9.8%, nonfarm payrolls are expected unchanged at -20k and consumer credit is expected at -3.1bln compared to – 1.7bln last month.

JPY
JPY traded higher supported by Yuan revaluation speculation and positive Japanese economic data. A newspaper report suggests that the Chinese government is assessing the potential impact of currency gains and this report fueled Yuan revaluation speculation. JPY sometimes trades as a proxy for Yuan revaluation. Japan reported that January industrial production rose by 2.5% and January retail sales rose by 2.6%. Core CPI declined by 1.3%. Japan’s Finance Minister Kan said that Japan still faces deflation but the CPI decline appears to be slowing. The improvement in Japan’s industrial production and retail sales and a slowdown in the CPI decline will reduce pressure on the BOE to expand quantitative ease. This marks the fifth day in a row that the JPY traded higher with the JPY supported by safe haven demand sparked by diminished risk appetite as global equity markets struggle due to concern about the outlook for global recovery. JPY also has benefited from this week’s Japanese economic data which showed improvement in export sales and stronger retail sales and industrial production. In addition, the JPY has been supported by diminished Fed rate hike fears as Fed Chairman Bernanke says that it is not clear if the US recovery self-sustaining and that interest rates will have to remain low for an extended period. Analysts at J.P. Morgan Chase forecast JPY will trade at 87 next month as traders reduce bets that the Fed will raise interest rates sooner than expected. There was limited reaction to a Bloomberg report which states that the chief global economist for Goldman Sachs O’Neill sees Japan facing the biggest crisis risk in the G-10. According to O’Neill Japan is running out domestic savings and this will make it difficult for Japan to finance its rising budget deficit. O’Neill went on to say that he thinks that the JPY is highly overvalued.

Next week’s Japanese economic calendar includes the March 2nd release of January household spending expected at -0.5% compared to 1% last month. The January unemployment rate will also be released on March 2nd expected unchanged at 5.1%.

Key technical levels to watch in USD/JPY include support at 88.55 the February 4th low with resistance at 90.29 the February 25th high.

EUR
EUR traded higher supported by a modest recovery in risk sentiment as global equity markets rallied in Friday’s trade and by gains in cross trade to the GBP. An upward revision in UK and US GDP, positive industrial and retail sales data from Japan and strong private sector credit demand from Australia helped to fuel today’s improvement in risk sentiment. EUR rallied in cross trade to the GBP with GBP pressured by report of higher than expected UK Q4 government spending. The trade ignored report that EU January inflation declined by 0.8% compared to a 0.3% rise last month. EUR rallied despite ongoing concern about the Greek debt crisis. Greece suspended a bond sale today because of continued market turmoil. There is an interesting report on Bloomberg quoting Goldman Sachs chief economist O’Neill that the Greek debt crisis may make EMU stronger as EU officials seek closer political ties between its members. According to O’Neill, German officials are pressing for greater political union. Focus turns to next Thursday’s ECB policy meeting. No policy change is expected as the ECB is restricted by concern that the sovereign debt risk in Europe will be a drag on the EU recovery. Analysts at Deutsche Bank suggest that the EUR could decline to 1.2750 in the months ahead pressured by speculation the Fed will raise rates before the ECB. EUR remains vulnerable to concern about EU sovereign debt risk and ECB policy outlook. EUR downside may be limited because the EUR is oversold.

Next week’s EU economic calendar includes the March 1st release of EU February manufacturing PMI expected at 52 compared to 52.4 last month. EU January unemployment will be released on March 1st expected unchanged at 10%. On March 2nd February HICP will be released expected at 1.1% compared to 1% last month. On March 3rd EU February services PMI will be released expected at 52.3 compared with 52.5 last month along with January retail sales. January retail sales are expected at 0.2% compared to flat last month. ECB policy meeting will be held on March 4th, no change is expected.

The technical outlook for the EUR is negative. Expect EUR support at 1.3443 the February 19th low with resistance at 1.3627 the February 24th high.

GBP
GBP traded lower with initial support sparked by a report of an upward revision in UK Q4 GDP giving way to selling pressure sparked by report of higher than expected UK Q4 government spending. UK Q4 GDP was revised up to 0.3% from an original report of 0.1% rise. UK Q4 government spending rose by 1.2%, a 0.2% rise was expected. The improvement in UK GDP will likely encourage the BOE to hold monetary policy steady next week but concern about UK debt trumps the improvement in UK economic growth and the GBP traded lower. There was limited reaction to report that UK February GFK consumer confidence improved to -14 from -17 last month. GBP is trading at a nine-month low versus the USD pressured by concern about UK debt and in reaction to report of a sharp decline in UK business investment. As we approach the May 6th national election in the UK there are two major concerns about how the election may impact the UK deficit. Rating agencies have put the UK on notice that if the government does not take action take credible action to reduce the deficit the UK AAA sovereign debt rating may be cut. The most recent UK election polls suggest that the election may result in a hung parliament. A hung parliament could lead to gridlock and lack of credible effort to reduce the UK deficit. The other concern is that the new UK government will be under intense pressure to take immediate action to reduce the UK deficit. A premature withdrawal of the UK stimulus while the UK economy is still struggling could lead to more significant deterioration not only in the economic but the long-range deficit outlook. Analysts at UBS said that GBP could fall below parity with the EUR and 1.05 versus the USD if the UK government prematurely withdraws stimulus and tightens fiscal policy.

Next week’s UK economic calendar includes the March 1st release of February manufacturing PMI expected at 56.4 compared to 56.7 last month. January consumer credit, mortgage applications and mortgage lending will also be released on March 1st. Consumer credit is expected at 0.150 compared 0.052 last month, mortgage applications are expected at 52K compared to 59K last month and mortgage lending is expected at 1.102bln compared to 1.165bln last month. On March 3rd February consumer confidence index will be released expected at 68 compared to 69 last month along with February services PMI expected at 54 compared to 54.5 last month. BOE policy meeting will be held on March 4th, no policy change is expected but there is increased pressure on the BOE to expand quantitative ease.

The technical outlook for GBP is negative as GBP trades below 1.5300. Expect near-term support at 1.5115 the May 18th low with resistance at 1.5327 the February 26th high.

CAD
CAD traded higher supported by a slight improvement in risk sentiment as global equity markets rebound. The rebound in the equity markets is attributed to positive economic data from Japan which reported improvement in retail sales and industrial production, upward revisions in UK and US GDP and strong Australian private sector credit growth. These reports help offset some of this week’s concern about the outlook for the global recovery. CAD was also supported by report of a narrowing of Canada’s current account deficit. Canada’s Q4 current-account came in at -8.75bln compared to a revised -13.8bln deficit last quarter. CAD spent most of the week on the defensive pressured by a spike in risk aversion and weaker commodity and equity markets. Recent action in China to curb lending and concern about sovereign debt risk in Europe are the primary drivers of the uptick in risk aversion. The next major focus for CAD trade will be the BOC policy meeting scheduled for March 2nd. The BOC has pledged to maintain record low yields through June of 2010 provided inflation remains in check. Last week Canada reported above expectation inflation with CPI rising close to the 2% BOC target. Despite the rise in Canada’s inflation the BOC is expected to maintain steady rate policy. The BOC’s decision to maintain steady rate policy could be a mild negative for CAD.

Next week’s Canadian economic calendar includes March 1st release of January IPPI and RMPI along with December GDP. BOC policy meeting will be held on March 2nd, no policy change is expected. On March 4th January building permits will be released.

The technical outlook for CAD is mixed to negative as USD/CAD trades above 1.0600. Look for near-term support at 1.0510 the February 24th low with resistance at 1.0780 the February 5th high.

AUD
AUD traded higher supported by a rebound in risk appetite and in reaction to report of strong Australian private sector credit demand. As noted above, most of today’s economic data from Japan. Europe and the US came in above expectation and this helped to fuel a rebound in equities and risk sentiment. Australia’s January private sector credit rose by 0.4%. The private sector credit report follows yesterday’s report of much stronger than expected Australian Q4 CAPEX spending. The strong private sector credit rise and CAPEX spending revives RBA rate hike speculation and tilts the odds in favor of an RBA rate hike at next Tuesday’s policy meeting. This week the AUD has been under significant pressure as investors unwind carry trades because of uncertainty about the global recovery. Tightening in China, Fed rate hike fears, weaker than expected US consumer confidence housing and employment data and sovereign debt risks in Europe fuel concern about the outlook for the global recovery. Concern about the global recovery has overshadowed RBA rate hike speculation and RBA rate hike speculation has been less supportive for the AUD. Focus turns to next Tuesday’s RBA policy meeting. RBA watcher McCrann says there’s nothing standing in the way of the RBA from hiking rates 25bps at next Tuesday’s policy meeting. In light of this week’s US disappointing US economic reports and China’s tightening of credit the RBA may be less inclined to hike rates.

Next week’s Australian economic calendar includes the March 1st release of Q4 company profits expected 4% compared to -2.1% last month along with Q4 business inventories expected at 0.5% compared to 0.8% last month. Q4 current account will also be released on March 1st expected at -17bln compared to -16.2bln last month. On March 2nd January building approvals will be released expected at -4% compared to 2.2% last month along with January retail sales expected at 1% compared to -0.7% last month. RBA policy meeting will be held on March 2nd. A 25bps rate hike to 4% is expected. On March 3rd Q4 GDP will be released expected at 0.3% compared to 0.2% last quarter. On March 4th January trade balance will be released expected at -2.5bln compared to -2.25bln last month.

The technical outlook for the AUD is negative as the AUD failed to hold above 8900. Expect AUD support at 8750 the February 11th low with resistance at 8953 the February 24th high.

Source: Easy Forex

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