- Dollar Selling Easing as Heavy Event Risk Approaches, Euro’s Run Cools
- British Pound Little Budged on BoE Sentance’s Hawkishness, All Eyes on 4Q GDP
- Australian Dollar Slides after CPI Quiets Interest Rate Speculation
- Japanese Yen Traders Deal with Fiscal Warnings, Intervention Threats and the BoJ
- Euro: Markets More Willing to Accept Policy Officials Loaded Optimism
- Canadian Dollar Primed for Inflation Data Tuesday Despite BoC’s Downgrade
Dollar Selling Easing as Heavy Event Risk Approaches, Euro’s Run Cools
There wasn’t much working in the dollar’s favor to start the week; and the selling momentum from last week would keep the benchmark currency under pressure. Yet, looking ahead, there is a round of heavy event risk on the docket. And, while this wave doesn’t necessarily guarantee a favorable outcome for the greenback; the mere threat of an aggressive reversal will be enough to curb bearish conviction. This should suit most dollar-based majors just fine. Looking across the field, most of the liquid currency pairs are currently trading within stable ranges. GBPUSD, AUDUSD, USDJPY and USDCAD are among those pairs that are well within the highs and lows of their respective ranges of the past few weeks. The notable exception of course is EURUSD. Having rallied 9 of the past 11 days, the world’s most liquid exchange rate has covered approximately 700 pips and generated a meaningful bull trend. By comparing the relative progress of the euro-based major and its counterparts, it becomes clear that the former is heavily responsible for the weak performance of the Dollar Index itself these past few weeks. That being the case, should EURUSD throttle back; the dollar could regain its balance.
Through Monday, EURUSD’s tempered climb encouraged FX traders to flesh out fundamental concerns both taking place and just over the horizon. A terrorist bombing in Moscow and suggestions that the PBoC (People’s Bank of China) was trying to pump 300 billion yuan of liquidity into its markets could have stoked fear of the unknown and subsequently driven capital into the safety of the United States’ liquid markets. Instead, risk appetite measured in equity market benchmarks across the US, European and Asian sessions would paint a remarkably robust picture. It is difficult to pinpoint the source of the market’s optimism at any one point; but there certainly is a backdrop for short-term speculation in the persistence of supportive stimulus. Another Permanent Open Market Operation (POMO) by the Federal Reserve Monday injected $8.9 billion into the markets – and it should further be noted that a good portion of this purchase was completed using government debt that was just recently auctioned. Not only does this provide cheap capital and naturally depress the currency; it further looks like monetization of debts.
Unmitigated dollar selling is likely to ease up in the near future. Declines from here will be more dependent on the correct outcome from specific event risk. This can be partially encouraged by exogenous event risk; but that will be difficult given the influence of upcoming US-based releases. Over the next 24 hours, the Richmond factory activity index and housing inflation data from FHFA and S&P / Cash-Shiller will take a backseat to the straight-forward impact of the Conference Board’s consumer sentiment survey. That said, we shouldn’t expect a very large shock from any of this data. Though there is little change expected from the FOMC policy group come Wednesday; the influence that such a low probability scenario would have is too great to ignore. That said, we will have a distracted market on our hands.
Related:Discuss the Dollar in the DailyFX Forum, John’s Analyst Picks: GBPJPY, AUDUSD and EURJPY await a Catalyst
British Pound Little Budged on BoE Sentance’s Hawkishness, All Eyes on 4Q GDP
Interest rate speculation was back on the menu Monday with Bank of England member Andrew Sentance offering up commentary that looked to be the exact opposite of what fellow central banker Adam Posen offered up just a short time ago. Sentance said that the BoE’s credibility was as stake if they refused to tackle inflation. He went on to say that elevated price growth was not merely a “one-off†concern and that CPI could very well rise at least to a 4 percent clip through the year as global pressures increase and the economy stabilizes. That said, we may have to wait until the BoE minutes are release on Wednesday to see how the balance of power is really playing out. In the meantime, the headline release for Tuesday should keep traders more than entertained. The advanced reading of 4Q GDP is notable as a benchmark for growth for the advanced economy block; but it means more to the UK. Will the economy hold steady in the face of austerity or will cracks show early in the process?
Australian Dollar Slides after CPI Quiets Interest Rate Speculation
Early Monday, unfavorable fundamental winds were already starting to pick up for the Australian dollar. Treasury Swan voiced concern that the county’s worst floods in over four decades could have an “enormous†impact on economic activity. That is a heavy burden for those interest rate hawks out there; but there is always the inflation argument to fall back on – or is there? The 4Q CPI figures were due early Tuesday morning in Sydney; and the outcome was far from bullish for the currency. The headline, annualized reading unexpectedly slipped to a 2.7 percent clip against expectations of a 3.0 percent reading. More concerning was the drop in the core figure to its slowest pace in 11 years.
Japanese Yen Traders Deal with Fiscal Warnings, Intervention Threats and the BoJ
Policy officials seem to be doing whatever is within their means to drive the yen lower. Monday, the government warned that it may have to intervene on behalf of the exchange rate and Prime Minister reiterated the need for citizens to bear “a certain level of burden†when it comes to the nation’s fiscal troubles. And, in the meantime, the Bank of Japan is keeping the monetary pressure on. An early rate decision would see a hold on the benchmark rate range and maintenance of liquidity programs. Everything is there for a permanent funding currency.
Euro: Markets More Willing to Accept Policy Officials Loaded Optimism
The euro slowed its pace of its climb against the dollar, yen and British pound Monday; but it was the sharp correction from EURCHF that generated real concern. From the PMI statistics through the session, we saw factory activity slow modestly while services picked up. The real concern though going forward is whether the confidence from EU officials about the region’s finances should be the foundation of a recovery.
Canadian Dollar Primed for Inflation Data Tuesday Despite BoC’s Downgrade
The Bank of Canada revised its 2011 core inflation outlook lower; but will traders really take note of deficient inflation pressures when placing their trades? In the coming session, the December CPI statistics are due for release and the 2.5 percent headline forecast would add weight to the market’s belief that central bank dovishness is only talk. It is interesting that the market is pricing in three 25bps rate hikes in 12 months.
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ECONOMIC DATA
Next 24 Hours
|
Currency |
GMT |
Release |
Survey |
Previous |
Comments |
|
AUD |
23:00 |
Conference Board Leading Index (NOV) |
0.6% |
October reading was highest of 2010. |
|
|
JPY |
Bank of Japan Interest Rate Decision |
0.10% |
0.10% |
Market implies no chance of rate hike. |
|
|
AUD |
0:30 |
Consumer Prices Index (QoQ) (4Q) |
0.7% |
0.7% |
Australian consumer prices rose less than economists forecast in the third quarter, as costs for health and transportation declined. The country’s Bureau of Statistics may start releasing a monthly consumer price index, to produce more timely data. |
|
AUD |
0:30 |
Consumer Prices Index (YoY) (4Q) |
3.0% |
2.8% |
|
|
AUD |
0:30 |
Consumer Prices Index RBA Trimmed Mean (QoQ) (4Q) |
0.7% |
0.6% |
|
|
AUD |
0:30 |
Consumer Prices Index RBA Trimmed Mean (YoY) (4Q) |
2.6% |
2.5% |
|
|
AUD |
0:30 |
Consumer Prices Index RBA Weighted Median (QoQ) (4Q) |
0.7% |
0.5% |
|
|
AUD |
0:30 |
Consumer Prices Index RBA Weighted Median (YoY) (4Q) |
2.5% |
2.3% |
|
|
CHF |
7:00 |
UBS Consumption Indicator (DEC) |
1.63 |
Fell to a nine-month low in November. |
|
|
EUR |
7:00 |
German GfK Consumer Confidence Survey (FEB) |
5.4 |
5.4 |
Fell in January from a 3-year high the month prior. |
|
EUR |
7:45 |
French Consumer Spending (MoM) (DEC) |
0.3% |
2.8% |
French consumer spending increased in November by the most in 4 months. |
|
EUR |
7:45 |
French Consumer Spending (YoY) (DEC) |
0.5% |
1.5% |
|
|
GBP |
9:30 |
Gross Domestic Product (QoQ) (4Q A) |
0.5% |
0.7% |
U.K. growth rate likely slowed in 4Q as cold weather hurt services, retailers. |
|
GBP |
9:30 |
Gross Domestic Product (YoY) (4Q A) |
2.6% |
2.7% |
|
|
GBP |
9:30 |
Public Finances (PSNCR) (Pounds) (DEC) |
16.3B |
16.8B |
U.K. budget deficit swelled to a record in November, 6.1 billion pounds larger than the year prior. |
|
GBP |
9:30 |
Public Sector Net Borrowing (Pounds) (DEC) |
18.0B |
22.8B |
|
|
GBP |
9:30 |
Public Sector Net Borrowing ex Interventions (DEC) |
20.0B |
23.3B |
|
|
GBP |
9:30 |
Index of Services (MoM) (NOV) |
0.5% |
-0.4% |
U.K. October services declined by the most in six months led by government, transport and telecommunications. |
|
GBP |
9:30 |
Index of Services (3Mo3M) (NOV) |
0.8% |
0.6% |
|
|
CAD |
12:00 |
Consumer Price Index (MoM) (DEC) |
0.1% |
0.1% |
Canadian CPI likely rose in December to its highest YoY reading since 2008. |
|
CAD |
12:00 |
Consumer Price Index (YoY) (DEC) |
2.5% |
2.0% |
|
|
CAD |
12:00 |
Bank Canada Consumer Price Index Core (MoM) (DEC) |
-0.1% |
0.0% |
Canadian core prices have held below 2.0% YoY in the last nine months. |
|
CAD |
12:00 |
Bank Canada Consumer Price Index Core (YoY) (DEC) |
1.6% |
1.4% |
|
|
USD |
14:00 |
S&P/Case-Shiller Composite-20 s.a. (MoM) (NOV) |
-0.80% |
-0.99% |
S&P/Case-Shiller home price index dipped in October to its lowest level in six months. |
|
USD |
14:00 |
S&P/Case-Shiller Composite-20 (YoY) (NOV) |
-1.60% |
-0.80% |
|
|
USD |
14:00 |
S&P/Case-Shiller Home Price Index (NOV) |
145.32 |
||
|
USD |
15:00 |
Consumer Confidence (JAN) |
54.0 |
52.5 |
Unexpectedly declined in October. |
|
USD |
15:00 |
House Price Index (MoM) (NOV) |
0.0% |
0.7% |
Rose in Oct. for first time in 5 months. |
|
USD |
15:00 |
Richmond Fed Manufacturing Index (JAN) |
23 |
25 |
Closed 2010 at a seven-month high. |
|
Currency |
GMT |
Upcoming Events & Speeches |
|||
|
GBP |
19:40 |
BoE Governor Mervyn King Speaks on U.K. Economy |
SUPPORT AND RESISTANCE LEVELS
CLASSIC SUPPORT AND RESISTANCE – 18:00 GMT
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist 2 |
1.3885 |
1.6420 |
89.00 |
1.0000 |
1.0922 |
1.0600 |
0.8230 |
127.60 |
146.05 |
|
Resist 1 |
1.3750 |
1.6034 |
86.00 |
0.9775 |
1.0750 |
1.0200 |
0.8000 |
120.00 |
140.00 |
|
Spot |
1.3645 |
1.5999 |
82.47 |
0.9488 |
0.9943 |
0.9987 |
0.7638 |
112.54 |
131.94 |
|
Support 1 |
1.3425 |
1.5312 |
80.00 |
0.9300 |
0.9800 |
0.9600 |
0.6850 |
103.80 |
125.00 |
|
Support 2 |
1.2900 |
1.5186 |
75.00 |
0.9000 |
0.9700 |
0.9375 |
0.6585 |
100.00 |
119.00 |
CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT
|
Currency |
USD/MXN |
USD/TRY |
USD/ZAR |
USD/HKD |
USD/SGD |
Currency |
USD/SEK |
USD/DKK |
USD/NOK |
|
Resist 2 |
13.8500 |
1.6755 |
7.2790 |
7.8165 |
1.4945 |
Resist 2 |
7.7500 |
5.7800 |
6.2750 |
|
Resist 1 |
12.5000 |
1.5931 |
7.1750 |
7.8075 |
1.4655 |
Resist 1 |
7.5800 |
5.6625 |
6.1150 |
|
Spot |
12.0458 |
1.5632 |
7.0068 |
7.7974 |
1.2810 |
Spot |
6.5821 |
5.4629 |
5.7795 |
|
Support 1 |
11.7200 |
1.4724 |
6.4000 |
7.7490 |
1.2750 |
Support 1 |
6.4500 |
5.2625 |
5.7030 |
|
Support 2 |
11.4400 |
1.3475 |
5.9200 |
7.7450 |
1.2500 |
Support 2 |
6.1250 |
5.1000 |
5.5200 |
INTRA-DAY PIVOT POINTS 18:00 GMT
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist 2 |
1.3769 |
1.6070 |
83.18 |
0.9679 |
1.0012 |
1.0116 |
0.7711 |
113.24 |
132.65 |
|
Resist 1 |
1.3707 |
1.6035 |
82.82 |
0.9583 |
0.9978 |
1.0051 |
0.7675 |
112.89 |
132.29 |
|
Pivot |
1.3624 |
1.5978 |
82.57 |
0.9528 |
0.9948 |
0.9958 |
0.7621 |
112.56 |
132.00 |
|
Support 1 |
1.3562 |
1.5943 |
82.21 |
0.9432 |
0.9914 |
0.9893 |
0.7585 |
112.21 |
131.64 |
|
Support 2 |
1.3479 |
1.5886 |
81.96 |
0.9377 |
0.9884 |
0.9800 |
0.7531 |
111.88 |
131.35 |
INTRA-DAY PROBABILITY BANDS 18:00 GMT
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist. 3 |
1.3823 |
1.6171 |
83.39 |
0.9601 |
1.0046 |
1.0122 |
0.7744 |
114.03 |
133.58 |
|
Resist. 2 |
1.3779 |
1.6128 |
83.16 |
0.9573 |
1.0020 |
1.0088 |
0.7717 |
113.65 |
133.17 |
|
Resist. 1 |
1.3734 |
1.6085 |
82.93 |
0.9545 |
0.9995 |
1.0054 |
0.7691 |
113.28 |
132.76 |
|
Spot |
1.3645 |
1.5999 |
82.47 |
0.9488 |
0.9943 |
0.9987 |
0.7638 |
112.54 |
131.94 |
|
Support 1 |
1.3556 |
1.5913 |
82.01 |
0.9431 |
0.9891 |
0.9920 |
0.7585 |
111.80 |
131.12 |
|
Support 2 |
1.3511 |
1.5870 |
81.78 |
0.9403 |
0.9866 |
0.9886 |
0.7559 |
111.43 |
130.71 |
|
Support 3 |
1.3467 |
1.5827 |
81.55 |
0.9375 |
0.9840 |
0.9852 |
0.7532 |
111.05 |
130.30 |
v
Written by: John Kicklighter, Currency Strategist for DailyFX.com
To receive John’s reports via email or to submit Questions or Comments about an article; email jkicklighter@dailyfx.com
