The Dollar rose against the Euro on Monday and against the Yen near a four-year peak after G7 officials ended the Weekend meeting without giving a strong warning about the Japanese currency�s persistent weakness. Analysts said the key event for the Forex market this week would be the 4Q Japanese Gross Domestic Product data due Thursday; �the coming Japan GDP release for 4Q and its potential impact on BoJ policy will do far more to impact the Yen than the G7 platitudes�. A strong growth reading in Japanese GDP would likely increase the chance that the Bank of Japan will raise interest rates from the current level of 0.25% at its next policy decision on February 21st…
News and Events:
The Dollar rose against the Euro on Monday and against the Yen near a four-year peak after G7 officials ended the Weekend meeting without giving a strong warning about the Japanese currency�s persistent weakness. The Yen hit a record low against the Euro after the G7�s statement, which called investors to consider Japan�s strengthening economy and be wary about the market one-way bets in Forex. However, the statement did not specifically address the Yen�s rose as a funding currency in carry trades, in which the Japanese currency has been dumped in favor of higher-yielding units like the Euro and the Australian Dollar. Analysts said the key event for the Forex market this week would be the 4Q Japanese Gross Domestic Product data due Thursday; �the coming Japan GDP release for 4Q and its potential impact on BoJ policy will do far more to impact the Yen than the G7 platitudes�. A strong growth reading in Japanese GDP would likely increase the chance that the Bank of Japan will raise interest rates from the current level of 0.25% at its next policy decision on February 21st. Traders said the Dollar has found some support after Federal Reserve officials said on Friday that inflation was still above the Central Bank�s comfort level; another sigh that the Fed is unlikely to cut interest rates any time soon. Investors are also looking ahead to Federal Reserve Ben Bernanke, who delivers the Central Bank�s semiannual monetary policy report on Wednesday and Thursday. EurUsd declined -0.38% at 1.2960 while the Dollar gained 0.51% against the CHF to 1.2537. UsdJpy ended up 0.06% at 121.78 after hitting an intraday high 122.05 near the four-year peak at 122.20 hit last month. EurJpy made new high at 158.91; the highest level since Oct. 1998, before going back to 157.83 -0.32%. The Australian Dollar went notably down on Monday after the Reserve Bank of Australia cut its inflation forecast for 2007, leading investors to believe that the Central Bank will not raise interest rates in coming month. AudUsd slipped -0.55% to 0.7720.
Today’s Key Issues:
JPY National Holiday � Japanese markets closed
GB 09:30 GMT: January Consumer Price Index expected -0.6% vs 0.6% (MoM) and 2.9% vs 3% (YoY), Core Consumer Price Index expected 1.8% unchanged (YoY), January Retail Price Index expected -0.3% vs 0.8% (MoM) and 4.5% vs 4.4% (YoY).
Euro 10:00 GMT: February German ZEW Survey � Economic Sentiment expected 5 vs -3.6, Current Situation 66.5 vs 70.6 and Euro-zone ZEW � Economic Sentiment expected 3 vs -1.8
Euro 10:00 GMT: Euro-zone 4Q Gross Domestic Product expected 0.6 vs 0.5% (QoQ) and 3% vs 2.7% (YoY).
USD 13:30 GMT: December Trade Balance expected -$59.5B vs -$58.2B, Goods & Services Exports $126.1B vs $124.8B and Goods & Services Imports $185.6B vs $183B
CAD 13:30 GMT: December International merchandise Trade CAD 4.7B unchanged.
US 15:00 GTM: February IBD/TIPP Economic Optimism previously 53.7
Euro 16:00 GMT: ECB�s Tumpel and Gugerell speaking in Paris.
NZD 21:45 GMT: 4Q Producer Price Input expected 0.1% vs 2% and Producer Price Output expected -0.4% vs 0.7%.
JPY 23:50 GMT: December Current Account Total expected Yen 2042B vs 1756.4B
The Risk Today:
EurUsd remains in the 1.2865 to 1.3075 trading range for a month now. An upside break would expose 1.3130 (61.8% retracement of the 1.3298-1.2865 decline). Failure to stage a successful assault on 1.3075 would re-focus attention on last week’s 1.2900 low and then 1.2866 key level.
GbpUsd last week decline has yet to follow through below 1.9482, which marks a key support now. On the Upside, we would need a recovery beyond Friday’s 1.9604 high to relieve pressure on 1.9416 (76.4% retracement of the 1.9260-1.9920 advance) and get us closer to 1.9750 resistance (61.8% retracement of the 1.9917-1.9482 decline), where a break is required confirm a stronger bullish trend.
UsdJpy continue in a strong bullish trend heading 122.20 (end January high) and 122.40 (61.8% retracement of the 135.18 to 101.67 decline). A break of the latter would unlock 123.25. The near-term outlook is positive above Friday’s 121 low. Former resistance 121.40 might provide some support. In case of a reversal lower than this level; further support is defined at 120.20 just over last year 120 former psychological resistance.
UsdChf The recovery from 1.2380 violated initial resistance 1.2520 high, but it would take a move beyond 1.2575, the high from January 31 to signal a departure from the range. Support lies at 1.2376 late January low. A break of this level is required undermine the bull trend and also signal a reversal and target 1.2309 (38.2% retracement of 1.1881-1.2574 advance).
Resistance and Support: