The Yen strengthened on Monday on increasing investors concern that Group of Seven finance ministers will take a tougher line on recent weakness in the Japanese currency at their coming weekend meeting. The Yen is gaining support due to event risks ahead of the G7 and dealers said the reason for Monday�s rally was positioning on the Yen as last week�s data showed speculators held a record net short position on the Yen in the International Monetary Market. Extreme net short positions in a currency often suggest that a reversal in price is imminent because dealers might be uncomfortable about keeping such large positions open…
News and Events:
The Yen was stronger on Monday on increasing investors concern that Group of Seven finance ministers will take a tougher line on recent weakness in the Japanese currency at their coming weekend meeting. The Yen is gaining support due to event risks ahead of the G7 and dealers said the reason for Monday�s rally was positioning on the Yen as last week�s data showed speculators held a record net short position on the Yen in the International Monetary Market. Extreme net short positions in a currency often suggest that a reversal in price is imminent because dealers might be uncomfortable about keeping such large positions open. The US ISM non-manufacturing index climbed to an 8-month high of 59.0 in January, up from 56.7. The employment index, which has a much better correlation with payrolls in the service sector, fell to an 11-month low of 51.7 from 53.2. In addition, since the new orders index edged down to 55.4 from 55.6, analysts would see we this report as a negative outlook. They also suggest that January’s disappointing 111,000 increase in payrolls might be the start of a weaker trend. EurUsd fell -0.22% to 1.2933 and GbpUsd slipped -0.27% to 1.9607 after hitting intraday low at 1.9537. EurJpy fell as low as 155.28 before recovering to 155.46 (-1%). UsdJpy was down -0.75% at 120.21 and GbpJpy ended down -1.03% at 235.70.
Today’s Key Issues:
NZD Markets closed for Holiday Observance.
Euro 10:00 GMT: December Retail Sales expected 1.1% vs 0.5% (MoM) and 2.3 vs 1.3% (YoY).
Euro 11:00 GMT: December German Factory Orders seasonally adjusted expected 0.5% vs 1.5% (MoM).
GB 11:00 GMT: BRC January Retail Sales same store expected 1.8% vs 2.5% (YoY).
CAD 13:30 GMT: December Building Permits expected -2.5% vs 3% (MoM).
US Fed�s Paulson, Moskow, Bernanke, Yellen are speaking at different committee and conferences.
AUD 22:30 GMT: Reserve Bank of Australia Rate Decision expected unchanged at 6.25%.
The Risk Today:
EurUsd briefly violated 1.3050 resistance at 1.3057 (38.2% retracement of the 1.3368-1.2865 decline). The abrupt reversal has resulted in a break of at 1.2925 last week low and minor support. A break of 1.2900 trend support would signal a resumption of the bear trend and open 1.2866 and 1.2820 strong support. On the upside, a break of Friday’s high at 1.3074 is required to reinstate a bullish theme.
GbpUsd has found resistance at 1.9750 (61.8% retracement of the 1.9917-1.9482 decline), where a break is required to reinstate a bullish theme. Only a move above there would reasonably confirm a return of the underlying bull trend, opening the door for a run above the 1.9917 trend high. Minor support is around 1.9590 but only a break of 1.9482 would damage the growing bull trend recovered from last week 1.9482 lows.
UsdJpy is likely to remain vulnerable following the recent sell-off from 121.40. The former key breakout level of 119.90 marks the next important support and a break would expose 119.23 (38.2% retracement of 114.43-122.20). A move above 121.40 (61.8% retracement of the 122.20-120.10 decline) would confirm the return of the bull channel.
UsdChf�s recent sell-off from trend high resistance at 1.2585 was sharp, but so far it’s holding above the 1.2376 reaction low from end of January. A break of 1.2376 would clearly end the bull channel from early-December and open the door for next 1.2260 support. The next upside trigger is at 1.2585. For now initial support stands at 1.2430.
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Resistance and Support:
