After reaching an intraday high of 1.2959 the Euro began trading heavy leading up to the January Retail Sales Report. Consumer consumption in the region rose by 0.1% which was below the forecast of 0.2%. Additionally, the annualized rate fell for eighth month to -2.2% after a revised lower -2.4% the month prior.
[B][U]Talking Points[/U]
• Japanese Yen: Threatening 99.0 on BoJ Intervention Speculation
• Pound: BoE Members Talk Of More Quantitative Easing
• Euro: Retail Sales Fall For Eighth Month
• US Dollar: U of M On Tap
[U]Euro Gains Capped By Weak Retail Sales, Yen Continues To Fall On Intervention Speculation[/U][/B]
After reaching an intraday high of 1.2959 the Euro began trading heavy leading up to the January Retail Sales Report. Consumer consumption in the region rose by 0.1% which was below the forecast of 0.2%. Additionally, the annualized rate fell for eighth month to -2.2% after a revised lower -2.4% the month prior. Consumers continue to tighten their wallets as a deepening recession has weighed on their confidence. The Euro fell to as low as 1.2890 after the release before finding support. The 50-Day SMA at 1.2947 lies ahead and may limit upside potential. Additionally, the G-20 meeting this weekend could fail deliver like the G-7 and could reignite risk aversion which could weigh on the single currency.
The Yen continued to lose ground overnight as speculation has increased that the Swiss National Banks’ willingness to buy currencies in order to depreciate the Franc will encourage the BoJ to follow suit. The struggling export driven economies would benefit from a weaker currency and many have expected that the central banks would take such actions. Therefore, we could see Yen weakness continue with the March 5th high of 99.69 as a possible target. The 200-Day SMA looms just above at 99.91 and is a level to watch as a break above there would be the first time since October, 2008 and could lead to a breakout to the upside. Meanwhile, the Swiss Franc has pulled back form yesterday’s high of 1.19168 as traders take profits.
The Pound extended its gains from yesterday reaching as high 1.4071 as rising equity markets helped buoy demand. Resistance lies ahead at the 20-day SMA at 1.4158 which could be tested if U.S. stocks continue their momentum from yesterday. However, the remarks from BoE member Kate Barker that the central bank should continue to print money as “The evidence over the last month was of more pronounced weakness in the global economy and of fragility in the financial markets” could weigh on the pound.
The dollar continued to lose ground overnight as risk appetite grew on the back of comments from Bank of America CEO and expectations of more stimulus measures from Japan and China. Indeed, the troubled bank leader is expecting earnings of $50 billion for the year which reinforced comments from Citibank that t would be profitable in the first quarter. Stock markets have continued to find support as the end of the banking troubles gets closer. The University of Michigan consumer confidence survey could dampen optimism as forecasts are calling for the reading to fall to an all-time low of 55.0. If Americans continue to retrench it will limit future domestic growth and weigh on earrings expectations. The U.S. trade balance is also expected to cross the wires with the deficit expected to shrink to -$38.0 billion from -$38.9 billion which would be the lowest in six years. The contraction n consumer consumption is expected to have impacted demand for imports despite the dollar’s recent strength.
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To discuss this report contact John Rivera Currency Analyst:[/I] [EMAIL=“[email protected]”][email protected]
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