Most major currency pairs were confined to narrow ranges and volume was lighter than usual with most Asian and European markets closed. Trading resumed in the United States after markets were shut on Thursday for the Christmas holiday. The Dollar rose against the Yen on Friday after data showed sharp declines in Japan’s industrial output and inflation fueled speculation the Bank of Japan would pump large amounts of cash into the economy. The Euro was supported by expectations that the European Central Bank will lower interest rates further from the current 2.5%, but at a slower pace.
News and Events:
Most major currency pairs were confined to narrow ranges and volume was lighter than usual with most Asian and European markets closed. Trading resumed in the United States after markets were shut on Thursday for the Christmas holiday. The Dollar rose against the Yen on Friday after data showed sharp declines in Japan’s industrial output and inflation fueled speculation the Bank of Japan would pump large amounts of cash into the economy. However, the Dollar fell against the Euro as trading thinned out ahead of the year end. The Euro also advanced against the Yen. The single euro zone currency was supported by expectations that the European Central Bank will lower interest rates further from the current 2.5%, but at a slower pace.
On Friday, UsdJpy was 0.42% higher at 90.80. EurUsd was 0.18% lower at 1.4025 after trading as high as 1.4119. EurJpy rose 0.64% to 127.43. EurGbp also rose to a fresh high at 0.9618 or +1.18%. UsdChf was 0.35% lower at 1.0701. GbpUsd dropped 0.85% to 1.4618.
Last week, EurUsd rose 0.8% to 1.4025. EurJpy rose 2.5% to 127.43. UsdJpy was 1.62% higher at 90.80. UsdChf dropped 3.04% to 1.0701 and GbpUsd went 2.08% lower at 1.4618.
Government data on Friday showed Japan’s industrial production dived a record 8.1% while annual core consumer inflation slowed sharply, to 1% in November, underscoring fears the world’s second-largest economy could sink back into deflation next year. Bank of Japan policy board member Hidetoshi Kamezaki said on Thursday that the bank should consider ways to influence longer-term interest rates and corporate debt products if more easing steps are needed. The Bank of Japan 2 weeks ago lowered interest rates close to zero, mirroring steps by the US Federal Reserve, and moved to pump funds into the market to ease a corporate credit crunch.
Today’s Key Issues (time in GMT):
07:45 EUR Q3 French GDP detailed 0.1% vs -0.3% (qoq)
08:30 EUR December Italian Business confidence 70.6 vs 72.2
10:30 CHF December KOF Indicator -0.25 vs -0.05
17:00 USD November Midwest manufacturing 98.6
The Risk Today:
EurUsd: Market traded as high as 1.4720 in December but reversed most of its gain around 1.4000. Uptrend remains and room is open for 1.4867 23rd October high. A return over 1.5000 will clear the last 3-month pressure and may put key resistance 1.6000 into focus. On the downside, 1.3899 and 1.3600, former resistances, hold supports. Further support holds 1.2208 trendline support. Next long-term support holds 1.1640 November 2005 low and therefore 1.0739 September 2003 low.
GbpUsd: Market reversed most of Cable gains from mid-December and traded below 1.5000. Sentiment remains mixed but renewed strength may open the way to 1.6075 (38.2% retracement of 1.8669 � 1.4471 decline) and even 1.6570 (50% retracement). Uptrend may look for 1.6673 30th October high strong resistance. Further resistance holds 1.7816 (50% retracement of 2.1161-1.4471 decline). On the downside, strong supports hold 1.4471 December low ahead of 1.3682 March 2001 low.
UsdJpy: UsdJpy is still under pressure in the last 4 months and traded as low as 87.14 on 17th December before recovering to 90.99 high. Strong support holds 87.14. Further downtrend may open 79.70 April 1995 low. On the upside, strong resistance holds 100 pivot point, but only a recovery over 103 upper trendline and 105 pivot point will put focus again on 108 and 110.67 15th August high. Initial resistance holds 93.91 ahead of 97.43 24th November high.
UsdChf: Market traded as low as 1.0414 Mid-December in this months downtrend. Further weakness may open the way down to 1.0692 22nd September low and as well as 1.0500 and 1.0375. Such a move may look for 1.0013 15th July low in front of 0.9637 17th March low. Renewed up and over 1.2298, 21st November high, strength may look for 1.2463 strong resistance ahead of 1.2506 (61.8% retracement of 1.4278 � 0.9639 decline). Former support 1.0955 holds minor resistance.
Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland