U.S. Dollar Trading (USD) with little movement seen in the markets overnight the Dollar finished roughly where it began against most pairs. Weekly Jobless Claims were strong at 421k vs. 435k forecast. In US stocks, DJIA -2 points closing at 11370, S&P +4 points closing at 1233 and NASDAQ +7 points closing at 2616. Looking ahead, November Trade Balance is forecast at -43.5bn vs. -44bn previously.

The Euro (EUR) fell from day highs above 1.3300 after Ireland was downgraded by Fitch and Standard & Poors. The market slid below 1.3200 but when US stocks remained supported by strong data the Euro bounced back to the mid 1.3200 region. EUR/USD traded with a low of 1.3163 and a high of 1.3324 before closing at 1.3240. Looking ahead, November WPI is previously at -0.3%.

The Japanese Yen (JPY) struggled to push above multimonth resistance at Y84.40 and spent most of the day with a slight downside bias. Support was found at Y83.50. Q3 GDP at 1.1% vs. 1.0% forecast y/y.  Overall the USDJPY traded with a low of 83.50 and a high of 84.13 before closing the day around 83.70 in the New York session.

The Sterling (GBP) The BoE meeting was a non event with the central bank holding at 0.5% as expected and leaving the Asset Purchase Program at 200bn. Cable fell tracking the Euro lower but found support at 1.5700, finishing in the middle of the recent range. Overall the GBP/USD traded with a low of 1.5710 and a high of 1.5844 before closing the day at 1.5765 in the New York session. Looking ahead, November PPI forecast at 0.4% vs. 0.6% previously.

The Australian Dollar (AUD) the Aussie jumped on very strong November Jobs Numbers at +54k vs. +20k  forecast. The Unemployment rate fell to 5.2% vs. 5.4% previously. AUD/USD found solid resistance at 0.9880 and eased back to 0.9820. Overall the AUD/USD traded with a low of 0.9778 and a high of 0.9886 before closing the US session at 0.9840.

Oil & Gold (XAU) edged higher orbiting around the $1390 level. Overall trading with a low of USD$1380 and high of USD $1394 before ending the New York session at USD$1388 an ounce. Traded in a 200 point range but finished only slightly higher. WTI Oil Closed +$0.29 at $88.57 a barrel.

TECHNICAL COMMENTARY

Currency	Sup 2	Sup 1	Spot	Res 1	Res 2
EUR/USD	1.2969	1.3165	1.3245	1.3323	1.3401
USD/JPY	82.32	83.46	83.80	84.41	85.40
GBP/USD	1.5581	1.5669	1.5770	1.5841	1.5965
AUD/USD	0.9625	0.9739	0.9855	0.9939	1.000
XAU/USD	1362.00	1371	1389	1404	1438
OIL/USD	87.0	88.00	88.75	90.00	91.00

Euro – 1.3245

Initial support at 1.3165 (Dec 9 low) followed by 1.2969 (Nov 30 low). Initial resistance is now located at 1.3323 (Dec 9 high) followed by 1.3401 (Dec 7 high)

Yen – 83.80

Initial support is located at 83.46 (Dec 8 high) followed by 82.32 (50% retrace of 80.22-84.41). Initial resistance is now at 84.41 (Nov 29 high) followed by 85.40 (Sept 24 high).

Pound – 1.5770

Initial support at 1.5669 (Dec 8 Low) followed by 1.5581 (Dec 3 low). Initial resistance is now at 1.5841 (Dec 9 high) followed by 1.5965 (Nov 23 high).

Australian Dollar – 0.9855

Initial support at 0.9739 (Dec 3 low) followed by the 0.9625 (Dec 2 low). Initial resistance is now at 0.9939 (Dec 3 high) followed by 1.0000 (Psychological Resistance).

Gold – 1389

Initial support at 1371 (Dec 3 low) followed by 1362 (Nov 30 low). Initial resistance is now at 1404 (Dec 8 high) followed by 1438 (1329.70 plus 1315.45-1424.60).

Oil – 88.40

Initial support at 88.00 (Intraday Support) followed by 87.00 (Intraday Support). Initial resistance is now at 90.00 (Intraday Resistance) followed by 91.00 (Intraday Resistance).

Written by Anthony Darvall

Source: Easy Forex

Recommended Forex Brokers: AvaFX and Forex Yard

CURRENCY TRADING SUMMARY – 5th April (00:30GMT)

U.S. Dollar Trading (USD) was broadly stronger in thin trading after the March Jobs report showed +162k new jobs and solid revisions in February and January. The March Unemployment Rate was steady at 9.7%. USD/JPY ticked higher into the Y94 region but ran out of steam above the Y94.60. EUR/USD slipped below 1.3500 before steadying into the close. US stocks were closed. Looking ahead, March ISM Services forecast at 54 vs. 53 previously. Looking ahead, February Pending Home Sales are forecast at 0.6% vs. -7.6% previously.

The Euro (EUR) the Strong USD after the Jobs data was the only move on Note on Easter Friday with support under the 1.3500 tested and holding. EUR/GBP continued to be pressured at the 0.8880 support with many feeling it is only a matter of time before the level breaks down. Next support of note is at the 0.8812. Overall the EUR/USD traded with a low of 1.3475 and a high of 1.3591 before closing at 1.3495. Looking ahead, Bank Holiday in Europe.

The Japanese Yen (JPY) the rally continued on the USD/JPY closing in the mid Y94 region as the market continues to push US Treasury Yields higher and Global stocks rally. AUD/JPY pushed Y97 and GBP/JPY tested Y144 as the risk currencies outperform. Overall the USDJPY traded with a low of 93.66 and a high of 94.69 before closing the day around 94.63 in the New York session.

The Sterling (GBP) bowed to the broad USD strength but held up better than most currencies as the Pound rally remains intact and risk appetite strong. Gains against the Euro and Yen continued and further gains are likely given the relatively low base from which the rally started. Overall the GBP/USD traded with a low of 1.5183 and a high of 1.5296 before closing the day at 1.5192 in the New York session.

The Australian Dollar (AUD) held close to the 0.9200 level as AUD/JPY buying countered USD strength after the NFP data. Strong Gold and Oil are underpinning the Aussie’s strength along with the RBA rate hike possibility on Tuesday. AUD/NZD is holding above 1.3000 nicely and could resume its recent uptrend. Overall the AUD/USD traded with a low of 0.9184 and a high of 0.9214 before closing the US session at 0.9187.

Oil & Gold (XAU) traded in a tight range above $1120 for the majority of the day. Overall trading with a low of USD$1117 and high of USD$1127 before ending the New York session at USD$1120 an ounce. Crude Oil was Closed for trading on Easter Friday.

TECHNICAL COMMENTARY

Currency	Sup 2	Sup 1	Spot	Res 1	Res 2
EUR/USD	1.3247	1.3270	1.3530	1.3591	1.3608
USD/JPY	91.09	91.77	94.40	94.64	95.10
GBP/USD	1.4784	1.4975	1.5270	1.5327	1.5382
AUD/USD	0.8936	0.8978	0.9215	0.9216	0.9250
XAU/USD	1085.00	1102	1126.00	1133	1145.00
OIL/USD	83.80	85	85.80	86	88.00

Euro – 1.3530

Initial support at 1.3270 (March 26 low) followed by 1.3247 (May 6 low). Initial resistance is now located at 1.3591 (April 1 high) followed by 1.3608 (0.618 of 1.3818-1.3268)

Yen – 94.40

Initial support is located at 91.77 (Mar 25 low) followed by 91.09 (Mar 24 low). Initial resistance is now at 94.64 (Aug 25 high) followed by 95.1 (0.618 of 101.44-84.83).

Pound – 1.5270

Initial support at 1.4975 (Mar 30 low) followed by 1.4784 (Ma low). Initial resistance is now at 1.5327 (Mar 31 high) followed by 1.5382 (Mar 19 high).

Australian Dollar – 0.9215

Initial support at 0.8978 (Mar 4 low) followed by the 0.8936 (Mar 1 low). Initial resistance is now at 0.9216 (Mar 30 high) followed by 0.9250 (March 17 high).

Gold – 1126

Initial support at 1085 (Mar 24 low) followed by 1078 (Feb 12 low). Initial resistance is now at 1118 (Mar 31 high) followed by 1133 (Mar 17 high).

Oil – 85.80

Initial support at 85.00 (Intraday Support) followed by 83.80 (Intraday Support). Initial resistance is now at 86.00 (March high) followed by 88.00 (Intraday Resistance).

Source: Easy Forex

My recommended Forex Broker is Forex Yard.

CURRENCY TRADING SUMMARY – 5th March (00:30GMT)

U.S. Dollar Trading (USD) was strong even as stock markets remained positive as the EUR/USD slumped after the ECB announcement and USD/JPY rallied on increasing US Bond Yields. Weekly Jobless Claims improved to 469k vs. 496k. January Pending Home Sales fell -7.2% tracking a broad set of weak housing data in January. In US stocks, DJIA +47 points closing at 10396, S&P +4 points closing at 1122 and NASDAQ +11 points closing at 2292. Looking ahead, February NonFarm Payrolls forecast at -50k vs. -20k previously and the Unemployment rate is forecast at 9.8% vs. 9.7%.

The Euro (EUR) lost ground after the ECB held rates at 1.0% and described the current levels as appropriate with economic growth uneven. EUR/JPY held its own as stock markets improved but EUR/AUD slumped back close to the key 1.50 handle. Also released, Q4 GDP confirmed at 0.1%. Overall the EUR/USD traded with a low of 1.3551 and a high of 1.3714 before closing at 1.3570. Looking ahead, January Factory Orders are forecast at 1.5% vs. -2.3% m/m.

The Japanese Yen (JPY) suffered a major reversal of fortune against the USD with the 3 month Libor turning to the dollars favor for the first time since August 2009. General USD strength and solid crosses also underpinned. GBP/JPY is beginning to rally from 9 month lows at Y132. Overall the USDJPY traded with a low of 88.12 and a high of 89.27 before closing the day around 89.10 in the New York session.

The Sterling (GBP) rallied on heavy GBP/JPY buying in New York to trade above 1.5100 but this was short lived as the Euro fell back late in the day and the pair ended on a slightly weakish footing. EUR/GBP moved lower but is still contained inside the 90-91 range. The BOE held at 0.5% and kept the Asset Purchase Program at 200bn. Overall the GBP/USD traded with a low of 1.5004 and a high of 1.5139 before closing the day at 1.5040 in the New York session. Looking ahead, February PPI input is forecast at 0.25 vs. 2% previously m/m.

The Australian Dollar (AUD) tracked the EURO lower as AUD/JPY broke down through Y80 in early Europe before heavy buying emerged later in New York to keep the AUD/USD near the 0.9000 level. January Trade Balance was at -1.2bn vs. -1.5bn forecast. Overall the AUD/USD traded with a low of 0.8977 and a high of 0.9056 before closing the US session at 0.9040.

Oil & Gold (XAU) fell back as the strong USD discouraged commodity buying. Overall trading with a low of USD$1125 and high of USD$1142 before ending the New York session at USD$1132 an ounce. Held ground as the improving sentiment countered the stronger dollar. Crude Oil was down -$0.30 ending the New York session at $80.60.

TECHNICAL COMMENTARY

Currency	Sup 2	Sup 1	Spot	Res 1	Res 2
EUR/USD	1.3436	1.3552	1.3580	1.3736	1.3788
USD/JPY	87.37	87.74	89.10	89.50	90.36
GBP/USD	1.4855	1.4959	1.5030	1.5136	1.5209
AUD/USD	0.8863	0.8936	0.8995	0.9086	0.9147
XAU/USD	1121.00	1125	1132.00	1144	1161.00
OIL/USD	78.00	80	80.50	82.00	82.50

Euro – 1.3580

Initial support at 1.3552 (Mar 4 low) followed by 1.3436 (Mar 2 low). Initial resistance is now located at 1.3732 (Mar 3 high) followed by 1.3788 (Feb 17 high)

Yen – 89.10

Initial support is located at 87.74 (Dec 10 low) followed by 87.37 (Dec 9 low). Initial resistance is now at 89.50 (Feb 26 high) followed by 90.36 (Feb 23 high).

Pound – 1.5030

Initial support at 1.4959 (Mar 3 low) followed by 1.4855 (Mar 2 low). Initial resistance is now at 1.5136 (Mar 4 high) followed by 1.5209 (Mar 1 low).

Australian Dollar – 0.8995

Initial support at 0.8936 (Mar 1 low) followed by the 0.8863 (Feb 26 low). Initial resistance is now at 0.9086 (Mar 3 high) followed by 0.9147 (Jan 21 high).

Gold – 1132

Initial support at 1125 (Mar 4 low) followed by 1111 (Mar 1 low). Initial resistance is now at 1144 (Mar 3 high) followed by 1161 (Jan 11 high).

Oil – 80.50

Initial support at 80.00 (Intraday Support) followed by 78.00 (Intraday Support). Initial resistance is now at 82.00 (Intraday Resistance) followed by 82.50 (Intraday Resistance).

Source: Easy Forex

My recommended Forex Broker is Forex Yard.

Pound Skids to 10 Month Low

CURRENCY TRADING SUMMARY – 2nd March (00:30GMT)

U.S. Dollar Trading (USD) had a mixed day with strength against the Pound and Euro not being replicated against risk currencies such as CAD and AUD which tracked stock markets higher. February ISM manufacturing slipped to 56.5 vs. 57.5 forecast. In US stocks DJIA +78 points closing at 10400, S&P +11 points closing at 1115 and NASDAQ +35 points closing at 2273. Looking ahead, Weekly Redbook previously at 1.6% m/m.

The Euro (EUR) enjoyed support in Asia on the back of proposed debt bailout of Greece but there was little follow through in Europe when no new information was released. The pair was subsequently pulled lower from heavy Cable Sales. Overall the EUR/USD traded with a low of 1.3459 and a high of 1.3659 before closing at 1.3570. Looking ahead, January PPI is forecast at 0.6% vs. 0.1% m/m previously.

The Japanese Yen (JPY) stayed within Friday’s range with most of the action kept to the crosses with GBP/JPY slumping to 10 month lows near Y132. AUD/JPY outperformed closing above the key Y80 level. Overall the USDJPY traded with a low of 88.71 and a high of 89.50 before closing the day around 89.10 in the New York session. Looking ahead, January Unemployment is forecast at 5.2% vs. 5.1% previously.

The Sterling (GBP) crashed as key supports were broken and buyers capitulated in a stoploss fueled 400 pip fall. GBP/AUD hit 25 year lows below 1.66 and EUR/GBP soared over 0.9000 to touch 0.9150 in major moves across the board. GBP/USD recovered during the US session but the sentiment is still very bearish. Overall the GBP/USD traded with a low of 1.4781 and a high of 1.5206 before closing the day at 1.4990 in the New York session.

The Australian Dollar (AUD) stayed close to the key 0.9000 level on AUD/USD supported on dips by strong Gold and risk appetite. Traders stayed on the sidelines ahead of the RBA meeting today and January Retail Sales. Overall the AUD/USD traded with a low of 0.8933 and a high of 0.9018 before closing the US session at 0.9005. January Retail Sales are forecast at 0.5% vs. -0.7% m/m. Also released, March RBA Meeting forecast to hike 0.25%.

Oil & Gold (XAU) kept to a quiet range tracking the broader changes in USD strength. Overall trading with a low of USD$1111 and high of USD$1124 before ending the New York session at USD$1117 an ounce. Fell back on weak US manufacturing data and the stronger Dollar. Crude Oil was down -$1.24 ending the New York session at $78.42.

TECHNICAL COMMENTARY

Currency	Sup 2	Sup 1	Spot	Res 1	Res 2
EUR/USD	1.3424	1.3451	1.3555	1.3692	1.3788
USD/JPY	88.56	88.75	89.05	90.36	91.29
GBP/USD	1.4610	1.4704	1.4980	1.5209	1.5317
AUD/USD	0.8801	0.8863	0.8995	0.9071	0.9093
XAU/USD	1088.00	1104	1117.00	1131	1141.00
OIL/USD	77.00	78	78.70	80.00	82.50

Euro – 1.3555

Initial support at 1.3451 (Feb 25 low) followed by 1.3424 (May 18 low). Initial resistance is now located at 1.3692 (Feb 23 high) followed by 1.3788 (Feb 17 high)

Yen – 89.05

Initial support is located at 88.75 (Feb 26 low) followed by 88.56 (Feb 4 low). Initial resistance is now at 90.36 (Feb 24 high) followed by 91.29 (Feb 23 high).

Pound – 1.4980

Initial support at 1.4704 (Apr 30 low) followed by 1.4610 (April 29 low). Initial resistance is now at 1.5209 (Mar 1 high) followed by 1.5317 (Feb 26 low).

Australian Dollar – 0.8995

Initial support at 0.8863 (Feb 26 low) followed by the 0.8801 (Feb 25 low). Initial resistance is now at 0.9071 (Feb 23 high) followed by 0.9093 (Jan 25 high).

Gold – 1117

Initial support at 1104 (Feb 26 low) followed by 1088 (Feb 25 low). Initial resistance is now at 1131 (Feb 22 high) followed by 1141 (Jan 20 high).

Oil – 78.70

Initial support at 78.00 (Intraday Support) followed by 77.00 (Intraday Support). Initial resistance is now at 80.00 (Intraday Resistance) followed by 82.50 (Intraday Resistance).

Source: Easy Forex

My recommended Forex Broker is Forex Yard.

The Fed surprised the markets Thursday and hiked the discount rate 25bps to 0.75%. Stocks and commodities declined and the USD rallied to a nine month high in reaction to the Fed’s discount rate hike. Stocks and commodities rebounded from earlier losses and the dollar pared gains in reaction to Fed assurances that the discount rate hike was not a signal that the Fed is considering an imminent tightening of monetary policy. The Fed says that the rate hike was a technical action to start to normalize monetary policy. In a statement accompanying the Fed’s discount rate hike the Fed said that “the changes are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy.” Thursday’s discount rate hike was the first rate hike since December of 2008. The discount rate is the emergency lending rate that the Fed charges banks. The Fed will seek to maintain a 50bps spread between the Fed funds rate and the discount rate. The Fed funds rate is currently at 0 to 0.25%. According to the Fed’s Lockhart the Fed funds rate may remain at this level throughout 2010 as the Fed remains concerned about high unemployment and the strength of the recovery.

There are a number of reasons why the Fed elected to hike the discount rate. One reason for the discount rate hike is that the Fed sees the banking system strengthening. Another rationale for the discount rate hike is that the Fed wants to normalize monetary policy and begin to prepare for an eventual tightening of monetary policy. A tightening by the Fed is not likely to occur until the Fed sees employment growth and that the trend in employment growth is sustainable. The fact that the Fed hiked the discount rate was not as much a surprise as the timing of the rate hike. In testimony before Congress last week Fed Chairman Bernanke said that the Fed was considering the possibility of hiking the discount rate as one of the ways of normalizing policy and to start withdrawal of stimulus. Some argue that the Fed acted on Thursday because last week’s 10 year note auction was not well received and China sold a record amount of US debt in December. Foreign demand for US treasuries has declined. Because of the record US budget deficit the US will continue to auction a record amount bonds. If the Fed did not soon signal the start of withdrawal of stimulus, inflation fears might discourage foreign demand for US bonds and light a fire under the bond vigilantes.

Friday the US reported that CPI remains subdued with January core inflation reported to have declined by 0.1%. As long as US inflation remains subdued a tightening of Fed policy will remain far off into the future and a Fed funds rate hike is unlikely until late 2010 at the earliest. This suggests that initial selloff in the global equity markets and commodities and dollar surge was an overreaction to the Fed discount rate hike. So when is a Fed rate hike not a rate hike? when the rate hike means that no imminent tightening of policy is coming.

Source: Easy Forex

My recommended Forex Broker is Forex Yard.

FX Highlights

• The USD is trading higher in reaction to Wednesday’s FOMC minutes which state that the Fed discussed a possible discount rate hike in January and in reaction to concern about bad loans in Italy, GBP pressured by report of worse than expected UK January public sector borrowing, the UK posts its first budget deficit for January since 1993, commodity currencies trade lower pressured by report that the IMF looks to sell more gold, AUD downside limited by hawkish comments from the RBA’s Lowe and rising Australian consumer confidence, CAD supported by report of a sharp jump in Canada’s inflation
• Focus turns to today’s release of US initial jobless claims, PPI, leading indicators and Philly Fed survey and Canada’s CPI and net foreign investment flows
• IMF plans to sell 191.3 tons of gold
• The BOJ left monetary policy unchanged, says pace of recovery to remain moderate, BOJ did not announce new plans to combat deflation, BOJ governor urges the Japanese government to respect the BOJ’s independence, JPY higher
• RBA Assistant Governor Lowe says the outlook for the Australian economy is positive, he expects interest rates to return to more normal levels, RBA sold A$295mln in January, Australia’s Q4 NAB business confidence rose by two points to +18, January merchandise imports declined by 13%, AUD lower
• UK February manufacturing CBI at -36 compared to -39 last month, January public sector borrowing at 4.3bln, January M4 money supply growth at 0.6%, BOE’s Barker warns of a of another quarter of contraction in the UK economy, mortgage approvals declined to 49k from 60k last month, GBP lower
• Swiss February ZEW investor sentiment falls to 52.5 versus 56.6 last month, January exports fall by 3.6%, CHF lower
• Canada’s CPI rose by 0.3% in January with annual inflation rate at 1.9% compared to 1.3% in December, CAD higher
• Blue Gold Capital Management says China may let its currency appreciate by 5% next month
• Health insurer Humana Health Care plans to reduce its workforce by 5% and cut 2,500 jobs
• Mortgage applications declined by 2.1% in the week ending February 12th
• President Obama says the stimulus saved the US economy
• US equity markets set to open lower, European equities 0.25% higher, Nikkei closed 29 points higher

Upcoming Events

• US - Thursday, initial jobless claims for the week ending 02/13 will be released expected at 430k compared 440k last month along with January PPI expected at 0.8% compared to 1% last month, January leading indicators expected at 0.5% compared to 1.1% last month and Philly Fed survey for February expected at 17 compared to 15.2 last month
• CAN - Thursday, January CPI will be released expected to rise by 0.3% compared to -0.3% last month along with December net foreign investment expected at 8bln compared to 10.5bln last month

Source: Easy Forex

My recommended Forex Broker is Forex Yard.

EURUSD rallies as a lack of further developments in Greece causes a round of short covering!

• Yesterday’s trading saw some exciting rallies across the major asset classes, majors in FX, commodities and Equities. Risk appetite was elevated as NY Fed Empire State index leaped to 24 vrs an expectation of 16. We also had a positive NAHB housing Market index coming in at 17 vrs an expectation of 15. US stocks ended the session 1.68% higher Crude made a high of $77.01 following the reports. Yields on the 2 year US government bond traded between 0.8 – 0.9% with price action indicating a possible support has been built in the area and a swing upwards maybe expected. USDJPY price action yesterday was between 89.70 – 90.50.
• Yesterday we had the European Union’s Economic and financial council meeting which was mainly focused on finding resolve for the Greek issues. No final concrete measures were announced on how the EU may help Greece in case of a default however the Greek finance minister did highlight that Greece will not be requiring any assistance from the EU. Given the event the EURUSD actually managed to rally from 1.3588 – 1.3781. The move indicates that despite a lack of positive news coming out of the EU the market seems to be oversold and unwilling to take new short positions in the pair as rhetoric indicates that the chances of a Greek default are indeed low. In regards to economic data we saw the ZEW come in much better than expected at 45.1 which also added momentum to the rally and sparking further short covering of EURUSD shorts.
• In the UK the highlight of the day was the Consumer price index report which came in at 3.5% year on year, the BoE CPI target is 2% and such inflationary figures are an indication to future BoE policy. However Governor King’s letter to the chancellor noted that the jump is only temporary and the CPI will drift lower in the medium term. The market is still awaiting an explanation as to why the QE program was suspended given the weak outlook the BoE has on the UK economy. GBPUSD price action was between 1.5727 – 1.5794.
• Today’s financial calendar will have a number of important data starting with the UK ILO unemployment report for December expected at 7.8%. Building Permits and Housing starts in the US will paint a picture regarding how the housing sector is performing. We will also have industrial output for January expected at 0.7% and finally the FOMC releasing its 26-27 January minutes.

Currency to watch out for: EURUSD & USDJPY

• § The EURUSD pivot point is at 1.3700 with a preference to enter into long positions at 1.3710
• § The USDJPY pivot point is at 90.00 with a preference to enter long positions at 90.05

Today’s calendar and market movers:

• § UK ILO Unemployment for December
• § US Housing starts for January expected at 0.58 mln.
• § FOMC Minutes for 26-27^th of January are expected as well.

Equity Markets:

• US equities closed positive yesterday day with the DJIA and the SP500 closing 1.68% and 1.80% respectively.  The European burses were positive yesterday with the FTSE up 1.48% the DAX and the CAC closing negative at 1.47% and 1.66% respectively.  The NIKEI and the HSI at the time of writing is 2.72% and 1.76% respectively.

Source: Easy Forex

My recommended Forex Broker is Forex Yard.

• USD: Higher, China hikes reserve rates, stocks and commodities decline
• JPY: Lower, Nikkei closes higher before the China rate announcement
• EUR: Lower, doubt about the Greek rescue, EU growth slows
• GBP: Lower, downside limited by gains in cross to EUR
• CAD and AUD: AUD & CAD lower, pressured by spike in risk aversion, China rate hike

Overview
USD traded at a seven-month high Friday supported by a spike in risk aversion sparked by news that China’s central bank raised its reserve ratio by 0.5% and in reaction to doubt about a Greek rescue. The Chinese reserve ratio hike was a surprise and the second rate hike from China this year. Tightening of monetary policy in China sparked selling of equity and commodity markets and generates fear about the global recovery. There are conflicting reports from Europe about whether or not there will be a rescue package for Greece with the latest report that German Chancellor Merkel has rejected a call for Germany to fund the Greek rescue package. Other EU sources indicate that it is unlikely that the EU will add additional measures to support Greece at this time. The EUR was also pressured by report of slowing growth as EU industrial output falls more than expected and Q4 GDP posted a small rise. GBP traded lower but remains range bound with downside limited by gains in cross to the EUR. CHF traded lower pressured by rumors of SNB intervention. Commodity currencies traded lower pressured by a spike in risk aversion and concern that the Chinese rate hike will hurt the global recovery. US economic data was mixed with retail sales slightly stronger than expected and Michigan consume sentiment came in slightly lower than expected. Business inventories posted an unexpected drop.

Today’s US data:
January retail sales rose by 0.5%, a 0.3% rise was expected, ex-autos retail sales rose 0.6%. February Michigan sentiment came in at 73.7, a reading of 75 was expected. December business inventories declined by 0.2%, a rise of 0.2% was expected.

Upcoming US data:
Next week’s US economic calendar includes the February 16th release of February Empire State Manufacturing index expected at 16 compared to 15.9 last month. February NAHB index will also be released on February 16th expected unchanged at 15. On February 17th January housing starts will be released expected at 580k compared to 557k last month along with January building permits expected at 650k compared to 653k last month. January import prices, capacity utilization and production will be released on February 17th. Import prices are expected to rise by 0.8% compared to flat last month, industrial production is expected unchanged at 0.6% and capacity utilization is expected to rise to 72.5 compared to 72 last month. Initial jobless claims for  week ending to 02/13 will be released on February 18th expected at 430k compared to 440k last week along with January PPI leading indicators  and  the February Philly Fed survey. PPI is expected to rise by 0.7% compared to 0.2% last month, leading indicators are expected to rise by 0.6% compared to 1.1% last month and the Philly Fed is expected at 17 compared to 15.2 last month. On February 19th January CPI will be released expected at 0.3% compared to 0.1% last month.

JPY
JPY traded lower pressured by a broad USD rally against the majors sparked by news of a surprise rate hike from China. This marks the second session in a row that the inverse correlation of JPY price direction and risk sentiment has broken down. It’s not clear why the JPY is not attracting safe haven flows as equities traded lower and risk appetite is dampened by uncertainty about the outlook for the global recovery in light of today’s rate hike from China and ongoing uncertainty about sovereign debt risk in Europe. JPY traded to the day’s lows after the release of better than expected US retail sales. The better US retail sales report may fuel speculation about possible earlier Fed rate hike. The prospect for higher US yields appears to be the main factor pressuring the JPY. JPY traded mixed in cross trade gaining marginally versus EUR and AUD and weakening versus GBP. Analysts at Goldman Sachs forecast that JPY will decline to 94 in six months and 98 in a year in reaction to the impact of a deceleration in US growth in the second half of 2010.

On February 16th December revised industrial output will be released expected unchanged at 2.2%. On February 17th December tertiary activity will be released expected at -0.4% compared to -0.2% last month. February 18th December leading indicators will be released expected at 3.3% compared to 1.7%. On February 19th December all industry activity will be released expected at 0.2 % compared to 0.1 % last month.

Key technical levels to watch in USD/JPY include support at 89.59 the February 12th low with resistance at 91.09 the February 4th high.

EUR
EUR traded lower pressured by doubt about a Greek rescue plan, in reaction to a spike in risk aversion as China tightens and by disappointing EU economic data. There is a report that German Chancellor Merkel has rejected a call for Germany to fund the Greek rescue package and EU officials indicate that they are unlikely to take any near-term action on the Greek debt situation at this time. The announcement of China’s tightening of monetary policy was a surprise and generates concern about the outlook for the global recovery. EU Q4 GDP rose by just 0.1%. The EU Q4 GDP report shows that the EU economy is slowing. EU December industrial output declined by 1.7%. The decline in industrial output adds to concern about the EU recovery. The Greek debt crisis and concern about sovereign debt risk in peripheral European nations add additional risk to the EU recovery. The EU will continue to press for reduction of deficits in southern Europe and the reduction of spending is a threat to growth. Today’s Greek rescue news, Chinese tightening and EU economic data have implications for ECB policy and will likely force the ECB to delay its exit strategy and maintain accommodative bias for longer period. Goldman Sachs cut its forecast for the EUR because the Greek debt crisis has sapped confidence in the region and permanently increased the risk of holding the EUR.

Next week’s EU economic calendar includes the February 16th release of German February Zew index expected at 48 compared to 47.2 last month. On February 17th EU trade balance will be released expected at 4bln compared to 4.8bln last month. On February 19th, February manufacturing and services PMI will be released. The manufacturing PMI index is expected at 52.8 compared to 52.4 last month and the services PMI is expected at 52.7 compared to 52.5 last month.

The technical outlook for the EUR is negative. Expect EUR support at 1.3532 the February 12th low with resistance at 1.3689 the February 12th high.

GBP
GBP traded lower pressured by a spike in risk aversion as China’s tightens monetary policy. GBP downside was limited by gains in cross to the EUR sparked by doubt about the Greek rescue plan and in reaction to comments from the UK’s Brown that he expects the UK’s Q4 GDP to be revised higher. GBP is range bound but hovering near the bottom of its range. The trade will be looking for a possible downside breakout of this range. Focus turns to next Wednesday’s release of BOE policy minutes for the February meeting. The trade will be looking for clarification on the BOE’s decision to pause in its asset purchases and to leave the door open for future asset purchases if needed. The trade will also be looking for further insight into the BOE’s growth and inflation forecast. Earlier in the week the BOE released its quarterly inflation report and in that report the BOE said that inflation would come back below the 2% target over the next two years and that growth would be slower than expected averaging 1.2% over the next two years. GBP rallied in cross trade to the EUR with the EUR pressured by disappointment that the EU has yet to announce the details of a Greek support plan. The UK has its own government deficit troubles but Greek and EU sovereign debt risk are the current focus of investors. GBP remains vulnerable to concern about UK debt outlook, possible expansion of the BOE’s asset purchases and upcoming general election. Focus turns to next Tuesday’s release of UK inflation and BOE policy minutes Wednesday.

Next week’s UK economic calendar includes the February 16th’s release of January CPI expected at 0.8% compared to 0.6% last month. On February 17th December unemployment will be released expected at 7.6% compared to 7.8% along with January claimant count expected at -10k compared to -15.2k last and December average earnings expected unchanged at 1.6%. On February 18th January money supply will be released expected at -0.8% compared to -1.1% last month along with January net public-sector borrowing expected at 16bln compared to 15bln last month and January CBI orders expected at -36 compared to -39 last month. BOE policy minutes will also be released on February 17th.  January retail sales will be released on February 19th expected at 0.6% compared to 0.3% last month.

The technical outlook for GBP is negative as GBP trades below 1.5700. Expect near-term support at 1.5515 the May 21st low with resistance at 1.5775 the February 5th high.

CAD
CAD traded lower pressured by China’s tightening, weaker commodity and equity prices and a spike in risk aversion. Crude prices traded 1.5% lower as the rate hike in China generates concern about global recovery and global demand. CAD closely tracks the price of crude. There were no major economic reports released from Canada today. Most of this week’s Canadian economic data has been positive with Thursday’s release of higher House Price Index and Monday’s report of a sharp jump in Canadian housing starts. Last week, Canada reported better than expected employment growth. Despite the improvement in Canada’s housing data and employment the BOC is expected to maintain steady rate policy. In its quarterly report released Tuesday the BOC reaffirmed its low rate pledge and made no change in growth or inflation forecasts. Risk sentiment and the price of crude will remain the main driving factors for CAD trade along with speculation about monetary policy in China.

Next week’s Canadian economic calendar includes the February 16th release of December manufacturing shipments expected at 0.4% compared to 0.1% last month. On February 17th of December wholesale sales will be released expected at 2% compared to 2.5% last month. On February 18th January CPI will be released expected at -0.1% compared to 0.3% last month along with December net foreign investment and January leading indicators. Net foreign investment is expected at 6bln compared to 10.5bln last month and the leading indicator is expected at 1.6% compared to 1.5%. On February 19th December retail sales will be released expected at 0.6% compared to -0.3% last month.

The technical outlook for CAD is mixed to positive as USD/CAD trades below 1.0500. Look for near-term support at 1.0480 the February 4th low with resistance at 1.0630 the February 4th high.

AUD
AUD traded sharply lower giving back most of Thursday’s gains pressured by report of a rate hike from China. China raised its reserve rate by 0.5% in an effort to try to curb lending and slow the pace of China’s economy. China’s is a major export destination for Australia and there is concern that the Chinese rate hike could hurt the outlook for the global recovery and demand for Australian exports. There was little impact to a statement from the PBOC that the reserve rate hike does not signal a change in monetary policy and that monetary policy in China will remain moderately accommodative. AUD was also pressured by uncertainty about the outlook for a Greek rescue package as there are reports that German officials are rejecting calls to fund the Greek bailout. AUD traded sharply higher Thursday supported by report of stronger than expected employment growth and weaker inflation growth in China. Australia’s January unemployment rate declined to 5.3%, a reading of 5.6% was expected. Australia created three times as many jobs than had been expected with employment growth at 52K, a reading the 15k was expected. The stronger Australian employment report suggests that the Australian domestic recovery is gaining momentum. The report may revive RBA rate hike speculation. The Chinese rate hike caught the trade by surprise but the rate hike may have been taken because China reported lending in January rose at its third fastest pace on record. Recent weakness in the AUD has been mainly attributed to a reappraisal of risk appetite sparked by tightening of monetary policy in China and uncertainty about the outlook for sovereign debt risk in Europe.

There are no major Australian economic reports scheduled for the week.

The technical outlook for the AUD is mixed as the AUD fails to hold above 8900. Expect AUD support at 8766 the February 11th low with resistance at 8927 the February 2nd high.

Source: Easy Forex

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