The Greenback lost some ground on Friday after a series of good news events that were overshadowed by several moderately disappointing figures. The news rally started with the Empire State Business Conditions Index which measures the general business conditions of manufacturers in New York State. The index is derived from a survey that asks respondents to rate the level of general business activity as �decrease�, �increase�, or �no change�. The index was released at a much higher than expected rate of 25.8 with a consensus of 11.1 and a previous release of 8.0. The US Current Account was also released very strong at and the deficit was reduced from -203B to -193B. Finishing up the positive USD sentiment was the TIC Net Long-Term Transactions which measures the monthly difference in cross-border foreign and domestic purchases of long-term securities, and was released at a higher than expected 84.1B with expectations at 71.8B. The most influential news release on Friday was no doubt the US CPI. Although the figure was released at a higher than expected 0.7% the entire USD movement was overshadowed by the Core CPI figure which dropped to 0.1% and dragged the Greenback back down after a relatively long recuperation process, which caused the EUR/USD to close at 1.3380 on Friday. As for this week, it is probably going to be an insignificant period with almost no news coming from the US this week except the US Housing Starts and Building Permits, which will probably not create the next USD move, causing the USD to range trade.
There have been several important news events last week which demonstrated the Euro-Zone’s robustness. The UK Retail Sales went up to 0.4% after coming out of negative territory of -0.1%. The Swiss Interest Rate was hiked to 2.5% and caused almost no price movement as the movement was already priced in after it was hiked as expected. The Euro-Zone Trade Balance came out a bit weaker than expected at 3.5B after a wide expectation of 4.0B and a previous number of 5.4B. As for today, there is no news coming from Europe except the speech by Trichet which is expected in the evening. The following week will also be very light on news with the exception of the UK MPC Meeting Minutes which is due on Wednesday, and together with an almost empty US calendar, we should be sailing on quiet water throughout this week.
The Bank of Japan kept the interest rate unchanged at 0.5% on Friday, which was widely expected, and pushed the JPY to fresh record lows of 123.50 against the USD. In the monthly report, economic assessment remains unchanged with moderate expansion expected. BOJ’s Fukui said that CPI will likely continue to trend up with long-term interest rates moving higher. Governor Fukui also stated in the post meeting press conference that Bank of Japan needs to be “more confident about the outlook for the economy and prices” before increasing benchmark borrowing costs from the lowest rate among major economies. Also, the board members are “in absolute agreement that there are still many factors that need to be examined closely.” Traders are now more confident in regards to carry trades which will probably continue with full strength in the next month.
The pair now floats at 1.3390 which is the 50% retracement level of the 1.3520/1.3260 move, marking a strong resistance. If a massive break will occur beyond the 1.3400 level, we might see a further move up. The hourlies are overbought, and a correction move down is imminent.
The hourlies seem to be strong enough to push the pair further up, although the bearish dailies might be a concern. There is a bearish cross forming on the daily charts, and there is a bullish momentum on the 4 Hour chart. The general bias is up, with a target of 1.9830.
Trading at record levels, the pair is not showing any signs of a small correction move. The dailies are very bullish, and the hourlies are rotating between bullish and neutral. It looks as if the pair is proudly heading 124.00, with a steady pace.
The pair has started a correction, after the uptrend that took it from 1.2150 to 1.2450. The dailies are bearish and so are the hourlies which indicate that the momentum down is slowly increasing.
The Wild Card
The pair is in the midst of a very impressive uptrend and shows no signs of an ease. The massive JPY selling and the extremely bullish hourlies provide Forex traders with the opportunity to jump into a very good trend, and take about 60 pips as the target price floats around 245.20.