The Yen fell broadly on Tuesday after billionaire Warren Buffett offered to assume troubled bond insurers’ liabilities, increasing investor appetite for risky assets such as stocks and high-yielding currencies. Buffett told CNBC television that the plan of his Berkshire Hathaway company would cover $800 billion in municipal bonds, a step that investors hope might ease recent credit market turmoil. Low yielding currencies such as the JPY and CHF tend to attract flows during periods of uncertainty as their low interest rates reflect the capital surplus of their respective countries. Analysts said again that the European Central Bank will cut interest rates later this year to counter slowing economic growth.
News and Events:
The Yen fell broadly on Tuesday after billionaire Warren Buffett offered to assume troubled bond insurers’ liabilities, increasing investor appetite for risky assets such as stocks and high-yielding currencies. Buffett told CNBC television that the plan of his Berkshire Hathaway company would cover $800 billion in municipal bonds, a step that investors hope might ease recent credit market turmoil. The move reignited risk appetite, sparking a global stock markets rally and sending the low-yielding Yen tumbling across the board. Investors often use the Yen to fund acquisitions of higher yielding assets and currencies. EurJpy jumped to a session high of 157.02 yen, before retracing slightly to trade at 156.53, still1.05% higher on the day. EurChf firmed 0.51% to 1.6069. UsdJpy firmed 0.49% to 107.35. EurUsd raced to a session peak of 1.4615, before easing to 1.4580 – up about 0.54% percent from late Monday. Bond insurers guarantee more than $2.4 trillion of debt and have been struggling to hold on to their top credit ratings after suffering heavy losses from backing mortgage securities that have plunged in value. Markets worry that downgrades would rattle credit markets further and set off more large write-downs on Wall Street. Low yielding currencies such as the JPY and CHF tend to attract flows during periods of uncertainty as their low interest rates reflect the capital surplus of their respective countries. GbpUsd climbed 0.53% to 1.9598. Analysts said again that the European Central Bank will cut interest rates later this year to counter slowing economic growth.
Today’s Key Issues (time in GMT):
08:30 SEK 4Q Capacity utilisation -0.2%
08:30 SEK Riksbank rate 4% vs 4%
09:30 GBP December Average earning 3mth 3.9% vs 4%
09:30 GBP January ILO unemployment rate 5.3% vs 5.3%
10:00 EUR Dec Euro Zone Industriel production 0.6% vs 0.5% (MoM)
10:00 EUR Dec Euro Zone Industrial production 2.3% vs 2.7% (YoY)
10:30 GBP Feb 8th, Bank of England quarterly inflation report
13:30 USD January Advance Retail Sales -0.2% vs -0.4% (MoM)
13:30 USD January Advance Retail Sales ex-autos 0.2% vs -0.4% (MoM)
15:00 USD December Business Inventories 0.4% vs 0.4%
21:45 NZD January Food price index 0.9%
23:50 JPY 4Q GDP deflator -0.9% vs -0.4%
23:50 JPY 4Q GDP deflator annualised 1.6% vs 1.5%
23:50 JPY 4Q GDP 0.4% vs 0.4%
The Risk Today:
EurUsd Dropped by 2.01% last week at 1.4504 having posted 1.4440 low. Medium term trading range is now 1.4366 � 1.4952. Market traded as low as 1.4440 on Wednesday. Market is turning over 1.4500 pivot support, where below it, market might look down for 1.4280 next support after trendline support holding 1.4311 December low. Initial resistance holds 1.4652 Thursday high.
GbpUsd was under pressure last week returning below 1.9590 (38.2% retracement of 1.7049 � 2.1161 advance). Further pressure below 1.9500 might open the door toward 1.9337 January low and 1.9105 (50% retracement of 1.7049 � 2.1162 advance). Return in uptrend will be only confirmed over 2.0000 key level before 2.0100 resistance. Initial resistance holds 1.9590 former support.
UsdJpy It remains weak below 108, having tested 104.97 low 23rd January and 105.77 low in February. Initial resistance holds 107.89 and strong resistance holds 110.10 mid January double top ahead of 111.92 early January high. Pressure will be relieved over 108. Meanwhile, current trend may look for 106 support and next 104.97 support ahead of 104.20 trendline support.
UsdChf Posted a 2 � week high Thursday at 1.1104. Initial resistance holds 1.1123 late January high. Market might look for 1.1130 (38.2% of 1.1603 � 1.0838 decline). Early January double top 1.1191 marks strong resistance. Initial support holds 1.0933 Thursday low, 2 figures away from previous week low 1.0732
Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland