Risk appetite improved throughout yesterday, pushing EURUSD higher. Overnight EURUSD traded in the range 1.2955-1.3048 booking a 0.6% gain and USDJPY was range-bound between 89.33 and 89.68 � down by 0.1%. The dollar was weaker on a whole, declining against 7 of the 10 most traded currencies. Ahead today, the confirmation of January’s services and composite PMIs for the Euro zone will be out, and Euro zone retails sales. In the U.S Challenger job cuts survey (12:30 GMT) and the ADP employment report (13:15 GMT) will be out and the market may look to the two reports for some early directional indications of Friday’s non-farm payrolls number, though the forecasting accuracy of either survey has often been questioned in the past.
[B]News and Events:
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Risk appetite improved throughout yesterday, pushing EURUSD higher. Overnight EURUSD traded in the range 1.2955-1.3048 booking a 0.6% gain and USDJPY was range-bound between 89.33 and 89.68 � down by 0.1%. The dollar was weaker on a whole, declining against 7 of the 10 most traded currencies.
The general improvement in sentiment had been building during the day as fresh fiscal stimulus packages were announced in Australia and Sweden, and the BoJ which indicated its intention to purchase stocks held by Japanese banks. In the US, better than expected economic data, and quarterly earnings reports that were not as bad as had been feared gave risk appetite a further lift. The Nikkei 225, HangSeng and Shanghai Composite all booking between 2.2 and 2.7% gains in today�s trading.
Ahead today, the confirmation of January’s services and composite PMIs for the Euro zone will be out, and Euro zone retails sales is expected to show a further decline of 0.2% on the month. The market will continue to look for ECB commentary which may hint at a softening of tone ahead of tomorrow’s rates decision. In the U.S Challenger job cuts survey (12:30 GMT) and the ADP employment report (13:15 GMT) will be out and the market may look to the two reports for some early directional indications of Friday’s non-farm payrolls number, though the forecasting accuracy of either survey has often been questioned in the past.
Another story that has all of our attention is this talk of an HIA (Homeland Investment Act) bill being passed by the Senate Finance committee. If this bill passes it could give the USD a boost. In 2005 more than USD 200bn was repatriated. The BEA�s balance of payments data suggest that there could be as much as USD1000bn that could be repatriated. US firms have kept unusually high proportions of foreign dividends since 2005. A quick informal sampling of firm�s financial accounts also suggests that most firms have as much as or more abroad than they had in 2004 when the first bill was passed.
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Today’s Key Issues (time in GMT):[/B]
09:00 EUR Euro-zone purchasing manager index services 42.5 vs 42.5
09:30 GBP Purchasing manager index services 40.3 vs 40.2
09:30 GBP Official reserves changes
10:00 EUR Euro-zone Retail sales (MoM) -0.2% vs 0.6%
10:00 EUR Euro-zone Retail sales (YoY) -1.4% vs -1.5%
10:30 GBP BRC Shop price index (JAN)
12:00 USD MBA Mortgage applications (JAN 30)
12:30 USD challenger job cuts (YOY)
13:15 USD ADP Employment Change -535K vs -693K
15:00 USD ISM Non-Manufacturing Composite (JAN) 39.1 vs 40.1
21:45 NZD Unemployment Rage (Q4)
[B]The Risk Today: [/B]
[B]EurUsd:[/B] The broad move that started on the 28th of January saw it�s 50% retracement tested and broken during the night. While risk appetite is improving, an HIA could be a very big positive for the USD if passed. 1.2967 then 1.2945 are the initial support, while strong support holds at 1.2855 (23.60% retracement line on broad move and trend-line for range traded from 2nd to 4th of Feb). On the upside, 1.3090 is a major resistance as it coincides with the 61.80% retracement. Moving higher 1.3178 is the next level to watch for as this was tested several times on the way down from 1.3327.
[B]GbpUsd:[/B] The cable has seen its price action contract and trade a narrower range since the beginning of February. Strong resistance stands at 1.4500 (Feb 1st high). Nearer to current prices we see 1.4415 and 1.4486 as resistances � feeding on data from the 1.4182 � 1.4486 move from yesterday. Below 1.4326 stands as an initial support, which gives way to 1.4167 levels, further Sterling weakness could pave the way for sub 1.40 levels � Cable continues to be under pressure.
[B]UsdJpy:[/B] While the Yen has been bucking the trend as of late sneaky attempts at intervention are creeping in � the yen�s advance slowed recently but the recent weakening hasn�t held, Strong support stands at 87.13 � levels never seen since mid 1995 however closer to market price we are looking at 88.33 and 88.80. We see 90.00, 90.89 and 91.20 as initial resistances, however a strong breakout would test 94.65 (Jan 6 high).
[B]UsdChf:[/B] The swissy has risen steadily recently, the strong bullish trend that took us from 1.0892 to 1.1720 during the month of February sees multiple support levels. 1.1099 is a very strong level we tested 4 times last month before the pair moved higher, the next key level stands at 1.1315. In the nearer term 1.1418 looks to hold if we move higher as we�ve tested this level several times yesterday and today. On the upside the pair is capped at 1.172 (Jan 23 high), closer we see 1.1681 as a strong resistance 0.9646 � 1.2309 move from May 2008 to November 2008.
[B]Resistance and Support:
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By[B] Philippe Meyer [/B]- ACM Advanced Currency Markets, Geneva, Switzerland