The Far East session today began on a note of optimism after news emerged that the US is to announce a �bad bank� to buy toxic assets and the approval of a $500+ billion package of tax cuts and spending. This news sent JPY crosses higher which pushed EUR/USD up through 1.3200 to 1.3250 while GBP/USD approached yesterday�s highs near 1.4230. USD/JPY edged up but was capped by option related offers just ahead of 89.50. Liquidity is extremely poor and traders are quick to get out of any positions they have. Because of these factors, GBP/USD fell back to 1.4130 before rising again to trade just above 1.4250 as talk circulated of GBP/JPY buying for the launch of a Toshin fund in Japan. Trading remained lackluster at best as the market awaits this evening�s FOMC decision on interest rates. It is widely expected that rates will remain unchanged at 0.25% so the FOMC statement will be closely watched for clues on the outlook of the US situation.
[B]News and Events:
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The optimistic tone which began in Asia continued into the European session on Tuesday. EUR/USD traded through barriers at 1.3300 following better than expected German IFO data while GBP/USD rose to 1.4240 after the UK CBI distributive trades figures were, again, above forecasts and the UK authorities announced a package of loans to the UK car industry in the sum of �2.3 billion.
Later in the day, however, optimism took a serious knock when the European Central Bank�s Quaden said that the ECB is preparing to cut rates again, highlighting continued problems within the Euro Zone. This sent EUR/USD scurrying back to 1.3150. US Housing data was also poor along with consumer confidence which kept sentiment suppressed for the rest of the day. USD/JPY and hence JPY crosses ended the day down.
In short, the day did not really bring anything new to the table. All we can say with any degree of certainty is that optimism is only a short term friend. Economic and financial fundamentals dictate that it will be some considerable time before we can look forward to any lasting restoration of confidence.
The Far East session today began on a note of optimism after news emerged that the US is to announce a �bad bank� to buy toxic assets and the approval of a $500+ billion package of tax cuts and spending.
This news sent JPY crosses higher which pushed EUR/USD up through 1.3200 to 1.3250 while GBP/USD approached yesterday�s highs near 1.4230. USD/JPY edged up but was capped by option related offers just ahead of 89.50.
Liquidity is extremely poor and traders are quick to get out of any positions they have. Because of these factors, GBP/USD fell back to 1.4130 before rising again to trade just above 1.4250 as talk circulated of GBP/JPY buying for the launch of a Toshin fund in Japan.
Trading remained lackluster at best as the market awaits this evening�s FOMC decision on interest rates. It is widely expected that rates will remain unchanged at 0.25% so the FOMC statement will be closely watched for clues on the outlook of the US situation.
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Today’s Key Issues (time in GMT):[/B]
12:00 USD Mortgage Applications
14:00 USD Fed�s Open Market Committee Meets
19:15 USD FOMC Rate Decision 0.25% vs. 0.25%
23:50 JPY Retail Trade (YoY) -1.60% vs. -0.90%
23:50 JPY Retail Trade (MoM) SA -0.80% vs. -0.10%
[B]The Risk Today: [/B]
[B]EurUsd:[/B] At this point, intraday bias in EUR/USD is still mildly on the upside as long as 1.3094 minor support holds. Though, there is no confirmation of completion of fall from 1.4719 yet. Focus remains on 1.3385 resistance. Break will indicate that fall from 1.4719 has completed. This will also argue that such decline is merely part of the consolidation that started at 1.2329, which is indeed still in progress. In such case, stronger rebound could be seen, targeting 1.4719 high.
[B]GbpUsd:[/B] GBP/USD’s rebound from 1.3503 extends further to 1.4283 today and at this point, intraday bias remains on the upside as long as 1.4028 minor support holds. However, as mentioned before, we’re still expecting upside of the current recovery to be limited below 1.4469 support turned resistance and bring another fall. Below 1.4028 will flip intraday bias back to the downside first.
[B]UsdJpy:[/B] USD/JPY’s recovery lost steam after hitting 90.09 and intraday outlook is turned neutral since then. With 91.29 resistance intact, there is no confirmation that fall from 94.61 has completed. Below 87.97 minor support will flip intraday bias back to the downside first. Further break of 87.13 low will confirm medium term down trend has resumed. On the upside, above 90.09 will indicate that rise from 87.12 is still in progress.
[B]UsdChf:[/B] No change in USD/CHF’s outlook. Intraday bias remains on the on the downside as long as 1.1471 minor resistance holds. Further decline is still in favor but downside is expected to be contained by 1.1111 support and bring rally resumption. Above 1.1471 will flip intraday bias back to the upside and break of 1.1714 will target 1.2248/96 resistance zone.
[B]Resistance and Support:
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By[B] Loic Bondiguel [/B]- ACM Advanced Currency Markets, Geneva, Switzerland