The Yen and the Swiss franc strengthened on Monday as cautious investors reduce risk and lower exposures to currencies with high interest rates ahead of a group of US data this week. The dollar’s gain following a relatively strong US non-farm payrolls report last Friday was unable to create sufficient momentum on Monday. Investors continued to worry about recent volatile conditions where global stocks tumbled and the Yen rallied sharply, and also the drop in US Treasury Bond Yield on concerns about the US high risky sub-prime mortgage sector and a growing possible confrontation between the US and Iran.
News and Events:
The Yen and the Swiss franc strengthened on Monday as cautious investors reduce risk and lower exposures to currencies with high interest rates ahead of a group of US data this week. The Dollar gave up its gains from Friday when solid US employment data revived carry-trades, in which investors borrow cheaply low-yielding currencies such as the Yen and invest in higher-yielding currencies such as Sterling and New Zealand Dollar. The dollar’s gain following a relatively strong US non-farm payrolls report last Friday was unable to create sufficient momentum on Monday. Investors continued to worry about recent volatile conditions where global stocks tumbled and the Yen rallied sharply. While investors were focused on the global risk environment in the last few weeks, a bunch of economic data due this week should remind them that fundamentals are just as important as interest rates differentials. Meanwhile, market remains cautious following the drop in US Treasury Bond Yield on concerns about the US high risky sub-prime mortgage sector and a growing possible confrontation between the US and Iran.
UsdJpy fell to an intraday 117.22 low before ending to 117.58 still down -0.63%. GbpJpy recovered from early low 225.84 to end -0.59% at 227.24. EurJpy traded little changed at 155.10 after hitting 155.73 intraday high. UsdChf dropped -0.8% to 1.2249. EurUsd rose 0.56% to 1.3190.
Today’s Key Issues:
Euro 9:00 GMT: March Euro-zone ZEW survey Economic Sentiment previously 6.8
GB 9:30 GMT: January Visible Trade Balance expected -�6.9B to -�7B vs -�7.14B
Euro 10:00 GMT: March German ZEW survey Economic Sentiment expected 3.1 to 3.3 vs 2.9. Zew Current Situation 67.6 to 68 vs 70.9
Euro 10:00 GMT: January Euro-zone Industrial production seasonally adjusted 0.2% vs 1%
US 12:00 GMT: Secretary Paulson hosts conference on Capital Market in Washington
US 12:30 GMT: February Advance Retail Sales expected 0.3% vs 0% and ex-autos 0.3% vs 0.3%
US 14:00 GMT: January Business Inventories expected 0.1% vs 0%
GB 15:30 GMT: January Leading Indicator Index previously 0.1%
NZD 21:45 GMT: 4Q manufacturing Activity previously 2.7%
AUD 23:30 GMT: March Westpac Consumer Confidence previously 1.7%
The Risk Today:
EurUsd is still holding above support at 1.3074 and keeping the bullish tone from the 1.2865 mid-January alive. A retest and break above the 1.3189 resistance (61.8% of 1.3261-1.3072) would confirm a return of the underlying bull trend and open the door toward the 1.3260 late February trend high. On the downside, a break of 1.3074 would open the way toward 1.3024. There market would target 1.2990 (61.8% retracement of the 1.2865 to 1.3191 advance).
GbpUsd traded in between 1.9252 � 1.9434 range but couldn’t mark a significant direction on Monday and then remains heavy after the recent break of the bottom of the large trading range at the 1.9402 Mid-February low. Focus remains on the 1.9146 Pivot support from last November. Initial resistances 1.9403 resistance should cap again the upside for the near term.
UsdJpy rebound from last week low115.15 has put the bear on hold in the short term but maintains heavy tone. Further advance may clear 118.88 resistance. Still playing with 117.44 support, but a break of 115.15 early March low would be the clear signs of the downtrend return.
UsdChf tested minor support 1.2258. This may renew with the pressure initiated from late January 1.2575. On the upside, a break of 1.2342 (50% retracement of the 1.2575-1.2108 decline) would open the way toward 1.2438, Feb 22 high. Initial support is at 1.2258 ahead of last Thursday’s 1.2159 low.
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Resistance and Support:
