The huge rally in US equities on Friday (Dow: +2.7%, S&P +2.7%) set the tone for FX markets � specifically, an almighty short covering in risk. Announcement of Obama administration�s financial-recovery plan expected to be announced tomorrow; may include a ‘bad bank’ to purchase toxic assets Price action in Asia reflected a tinge of disappointment � S&P equity futures were down 1.5%, Nikkei erased earlier gains, and FX markets retraced some of Friday�s strong gains � AUD/USD sold off over 100 pips to 0.6650/55, USD/JPY was down 100 pips to 91.50, AUD/JPY down 160 to 60.85/90.
[B]News and Events:[/B]
The huge rally in US equities on Friday (Dow: +2.7%, S&P +2.7%) set the tone for FX markets � specifically, an almighty short covering in risk.
The announcement of the Obama admistration�s financial-recovery plan has been delayed until tomorrow as officials continue to debate proposals aimed at addressing the toxic debt clogging banks� balance sheets.
The German trade surplus narrowed to �10.7bn in December from a revised �10.9bn in November (previously �10.7bn), reflecting a 3.7% m/m fall in exports (after a 10.8% m/m decline in November) and a larger 4.1% m/m decline in imports (after a 5.8% m/m decline in November and 3.7% m/m fall decline in October).
Price action in Asia reflected a tinge of disappointment � S&P equity futures were down 1.5%, Nikkei erased earlier gains, and FX markets retraced some of Friday�s strong gains � AUD/USD sold off over 100 pips to 0.6650/55, USD/JPY was down 100 pips to 91.50, AUD/JPY down 160 to 60.85/90.
Yen crosses rallied on the open, EURJPY rallying 120 points to 119.99 before a nasty turnaround to a 118.18, as the Nikkei slid back towards flat during the day. Exporters were big seller for the fixing today, pushing USDJPY down 100 points from its high, to a 91.42 low. Japanese machine orders were better than expected at -26.8& y/y (exp -33%).
AUD and NZD both sold off heavily after the initial rally (AUD down 100 to .6650), and we have seen macro and system selling of both here. UK British Gas offered to buy Australia�s Pure Energy for AUD 796m cash. REINZ House Prices fell 8.3% y/y to January.
USDCAD tumbled 80 points through stops to a low of 1.2130, before turning straight back through 1.2200. The market felt long USDCAD after Friday�s employment driven moves.
[B]Today’s Key Issues (time in GMT):[/B]
07:00 EUR EUR German Trade Balance (euros) (DEC)
07:00 EUR EUR German Current Account (euros) (DEC)
13:15 CAD CAD Housing Starts ( JAN)
23:15 JPY JPY Housing Loans(JAN)
[B]The Risk Today: [/B]
[B]EurUsd:[/B] finding support above 1.2710, is again attempting to reverse on the upside. The currency pair is seen between 1.2990 and 1.2835, with first support at 1.2900. A rise in direction of 1.3070 is expected later on.
[B]GbpUsd:[/B] between 1.4780 and 1.4590 is expected to rebound towards 1.4875 (resistance line). Above that level, the strong resistance at 1.4980, as a bullish break point.
[B]UsdJpy:[/B] is still consolidating the rise above 90.75 (seen as a key support), after resistance around 92.40. Rather choppy, the currency pair is seen between 90.75 and 91.65, before a new rebound towards 92.45.
[B]UsdChf:[/B] testing further resistance (above 1.1740, the next main resistance at 1.1830), is seen between 1.1665 and 1.1570. A return below the latter level would argue for a retreat towards 1.1480.
[B]Resistance and Support:[/B]
By[B] Gregoire Tavernier [/B]- ACM Advanced Currency Markets, Geneva, Switzerland