- Dollar Shows Limited Reaction to Consumer Confidence, What about the FOMC Decision?
- British Pound Plunges as Weak 4Q GDP Bodes Ill for Future Austerity Influence
- Euro Confidence Fading as Disputes Over Coordination Overshadows EFSF Bond Sale
- New Zealand Dollar Traders Ready for RBNZ Rate Decision
- Canadian Dollar Slips after Inflation Data Curbs Appetite for Immediate Rate Hikes
- Japanese Yen: Are BoJ Growth and Inflation Forecasts to Optimistic to Trade On?
Dollar Shows Limited Reaction to Consumer Confidence, What about the FOMC Decision?
Though the dollar would show signs of life early in Tuesday’s trading session; the benchmark currency would ultimately end the day once again in the red. At this point, we have seen the dollar slide for the third consecutive session on a trade-weighted basis and 10 of the past 12 days against its benchmark counterpart the euro. It may surprise some that the dollar has maintained this disappointing trajectory despite promising event risk that would emerge throughout the trading day. But, the reality is that it takes a greater degree of influence to knock speculators off established trends; and the updates we have seen simply don’t meet the necessary criteria. On the other hand, the greenback may not be doing as poorly as EURUSD suggests. Over the past week, we have made the effort to differentiate the dollar’s performance against its various counterparts to garner a better sense of its individual performance. And, while the world’s most liquid exchange rate is still set up in its bull trend, we see that the dollar has held up far better against the other majors. The commodity bloc is still restrained to congestion, the disputed safe haven pairs (USDJPY and USDCHF) are trading within January’s range and GBPUSD saw its strongest dollar move in six weeks.
With prominent fundamental catalysts due later this week, there is a natural tendency to defer major positions (and thereby trend generation) until market participants are sure of the outcome to these upcoming events. With this distraction, the market would see a limited response to the scheduled event risk through the day. On the economic docket, the housing sector was given a disappointing bill of health after the S&P/Case-Shiller composite home price index saw a 1.6 percent annual pace of contract through November while the FHFA’s own home price index passed the month unchanged. However, the top economic report was the Conference Board’s consumer sentiment survey for January. The 60.6 reading was far better than expected, an eight month high and drew a distinct contrast to the disappointing University of Michigan figure. Yet, it was the details from the report that was truly encouraging. According to the statistics, the percentage of respondents that said jobs were plentiful hit its highest level since March 2009 and the fraction expecting an increase in income over the next six months rose to an eight-month high. Perhaps this economic recovery is on a far surer footing that many are expecting.
Conjecture about the return of the consumer sector is hard to translate into immediate trading. The same can be said about President Barack Obama’s State of the Union address. There was a tangible shift from monetary profligacy to conservancy; but it will take some time before stimulus measures are unwound and deficits are reined in. In the meantime, we have two events ahead that can significantly alter the course of the dollar in the short-term. Of the two, the advanced reading of 4Q GDP is top risk; but that is later down the line. Tomorrow, the market’s attention will be on the FOMC rate decision. Given the stubbornly high level of joblessness, the absence of pressing inflation and Fed members’ commentary these past weeks and months; there is unlikely to be any meaningful change in the group’s policy stance. That said, these meetings are just as much about nuance as blatant changes. If the market interprets an early end to the stimulus program, the dollar will rally.
Related: Discuss the Dollar in the DailyFX Forum, John’s Analyst Picks: GBJPY Quickly Hits its Targets, Moving on to a AUDUSD Setup
British Pound Plunges as Weak 4Q GDP Bodes Ill for Future Austerity Influence
There is no disputing the pound was the biggest mover in Tuesday’s trading session. The first reading of fourth quarter GDP was inherently an important indicator to begin with. However, it was even more critical as a benchmark for the economy’s health before the nation’s austerity measures really kick in. Given this significance, the realization of a 0.5 percent contraction against an equivalent expansion struck market participants as particularly concerning. And, while the ONS would attempt to attribute much of poor performance to some of the worst December weather in a century; it was clear that there was more to it than the elements. Whether this is the early influences of government spending cuts or a natural slowing in activity, the economy is poorly positioned to withstand austerity. That said, the interest rate angle to sterling bullishness has quickly been snuffed out ahead of the BoE minutes. In fact, 12 month rate forecasts marked the biggest drop since November 11, 2009.
Euro Confidence Fading as Disputes Over Coordination Overshadows EFSF Bond Sale
The euro is riding off its own momentum at this point. If it weren’t the fundamentals of the past 24 hours would have driven the currency lower. Since the market learned of tentative proposals to coordinate the effort to solidify the region’s finances and a nascent hawkish bearing from the ECB, we have seen both drivers loose traction. Today, the EU sold a first round of 5 billion euros worth of EFSF bonds to 40 billion euros in bids. Yet, the encouraging outcome here is once again marred by Germany’s insistence that the bailout program is large enough.
New Zealand Dollar Traders Ready for RBNZ Rate Decision
Between the FOMC and RBNZ rate decisions, the former has the better advertising. However, between the two, the New Zealand central bank has the greater probability of delivering a surprise. Historically, Governor Alan Bollard has proven himself to be far more flexible and reaction o changing economic conditions when it comes to monetary policy. That said, growth trouble and global uncertainties will likely keep the currency’s benchmark rate at 3.00 percent. That is itself a disappointing outcome for a currency that is largely an investment for the FX market.
Canadian Dollar Slips after Inflation Data Curbs Appetite for Immediate Rate Hikes
Canadian dollar traders offered a bigger reaction to the December CPI statistics than was expected Tuesday morning. Both headline and core readings fell short of expectations (2.4 and 1.5 percent respectively); and the loonie subsequently slid after the release. With underlying price growth just off its March 2008-low and restrained BoC expectations, the 75 bps of priced in hikes over the next 12 months looks exaggerated.
Japanese Yen: Are BoJ Growth and Inflation Forecasts to Optimistic to Trade On?
The deeper fundamental problems Japan faces are oftentimes obscured by the market’s taste for carry. Yet, the yen is still on a general path of appreciation while benchmark equity indexes extend their climb. The same bizarre sentiment is felt in the BoJ’s optimistic outlook for growth and positive inflation. The yen’s performance deviates dramatically from its fundamental means; and reconciliation will therefore be spectacular.
Tell us what you think of this article!
For Real Time Forex News, visit: http://www.dailyfx.com/real_time_news/
**For a full list of upcoming event risk and past releases, go to www.dailyfx.com/calendar
ECONOMIC DATA
Next 24 Hours
|
Currency |
GMT |
Release |
Survey |
Previous |
Comments |
|
JPY |
23:50 |
Corporate Service Price (YoY) (DEC) |
-1.3% |
-1.1% |
Declined annually in the last 26 months. |
|
JPY |
1:00 |
Small Business Confidence (JAN) |
45.9 |
Averaged a 45.0 reading in the last 6 years. |
|
|
NZD |
2:00 |
Credit Card Spending s.a. (MoM) (DEC) |
0.0% |
N.Z. credit card spending was unchanged in November following a three-month rise. |
|
|
NZD |
2:00 |
Credit Card Spending (YoY) (DEC) |
3.8% |
||
|
EUR |
9:00 |
Italian Retail Sales s.a. (MoM) (NOV) |
0.1% |
0.3% |
Italian retail sales increased in October for a fourth time in the past five years. |
|
EUR |
9:00 |
Italian Retail Sales (YoY) (NOV) |
1.5% |
-0.6% |
|
|
GBP |
9:30 |
BBA Loans for House Purchase (DEC) |
29250 |
29991 |
Home loans fell to lowest level since 2009. |
|
USD |
12:00 |
MBA Mortgage Applications (JAN 21) |
5.0% |
U.S. mortgage apps rose in the last 3 weeks. |
|
|
USD |
15:00 |
New Home Sales (DEC) |
300K |
290K |
Builders sold fewer new homes than forecast in November. |
|
USD |
15:00 |
New Home Sales (MoM) (DEC) |
3.5% |
5.5% |
|
|
EUR |
17:00 |
French Total Jobseekers Change (DEC) |
0.0 |
21.3 |
French total jobseekers increased in November for a third time in four months. |
|
EUR |
17:00 |
French Total Jobseekers (DEC) |
2698.1 |
||
|
USD |
19:15 |
Federal Open Market Committee Interest Rate Decision |
0.25% |
0.25% |
Market swaps imply a zero percent chance of a 25 basis points rate hike by the FOMC or RBNZ. |
|
NZD |
20:00 |
Reserve Bank of New Zealand Interest Rate Decision |
3.00% |
3.00% |
|
|
AUD |
23:30 |
Westpac Leading Index (MoM) (NOV) |
0.3% |
Rose in October for first time in 3 months. |
|
|
JPY |
23:50 |
Adjusted Merchandise Trade Balance (Yen) (DEC) |
523.9B |
425.7B |
Japan’s government said growth will slow in 2011 as the yen’s 11 percent surge against the dollar this year threatens the recovery. The government says GDP will probably rise 1.5% in the year starting April 1. |
|
JPY |
23:50 |
Merchandise Trade Balance Total (Yen) (DEC) |
465.0B |
161.1B |
|
|
JPY |
23:50 |
Merchandise Trade Exports (YoY) (DEC) |
9.3 |
9.1 |
|
|
JPY |
23:50 |
Merchandise Trade Imports (YoY) (DEC) |
12.0 |
14.2 |
|
|
JPY |
23:50 |
Japan Buying Foreign Bonds (Yen) (JAN 21) |
766.5B |
Japanese investors were net buyers of foreign bonds during the week ended Jan. 14, buying 766.5 billion yen ($9.3 billion) in overseas bonds and notes. |
|
|
JPY |
23:50 |
Japan Buying Foreign Stocks (Yen) (JAN 21) |
-24.7B |
||
|
JPY |
23:50 |
Foreign Buying Japan Bonds (Yen) (JAN 21) |
19.0B |
||
|
JPY |
23:50 |
Foreign Buying Japan Stocks (Yen) (JAN 21) |
325.4B |
||
|
Currency |
GMT |
Upcoming Events & Speeches |
|||
|
AUD |
Australia Market Closed For Australia Day |
||||
|
JPY |
5:00 |
Bank of Japan Monthly Report |
|||
|
GBP |
9:30 |
Bank of England Meeting Minutes |
|||
|
EUR |
15:45 |
ECB’s Ewald Nowotny Speaks on European Economy |
|||
|
EUR |
16:00 |
ECB’s Juergen Stark Speaks on Monetary Policy |
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 |
1.3682 |
1.5820 |
82.26 |
0.9424 |
0.9977 |
0.9966 |
0.7678 |
112.56 |
130.14 |
|
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 |
12.0898 |
1.5686 |
7.0665 |
7.7886 |
1.2797 |
Spot |
6.5368 |
5.4478 |
5.7652 |
|
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 |
1.3784 |
1.6128 |
82.99 |
0.9569 |
1.0056 |
1.0053 |
0.7716 |
113.41 |
133.02 |
|
Resist 1 |
1.3733 |
1.5974 |
82.63 |
0.9497 |
1.0017 |
1.0009 |
0.7697 |
112.98 |
131.58 |
|
Pivot |
1.3653 |
1.5863 |
82.30 |
0.9450 |
0.9964 |
0.9950 |
0.7660 |
112.41 |
130.61 |
|
Support 1 |
1.3602 |
1.5709 |
81.94 |
0.9378 |
0.9925 |
0.9906 |
0.7641 |
111.98 |
129.17 |
|
Support 2 |
1.3522 |
1.5598 |
81.61 |
0.9331 |
0.9872 |
0.9847 |
0.7604 |
111.41 |
128.20 |
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 |
1.3857 |
1.5992 |
83.16 |
0.9536 |
1.0080 |
1.0099 |
0.7782 |
114.02 |
131.76 |
|
Resist. 2 |
1.3814 |
1.5949 |
82.93 |
0.9508 |
1.0054 |
1.0066 |
0.7756 |
113.66 |
131.36 |
|
Resist. 1 |
1.3770 |
1.5906 |
82.71 |
0.9480 |
1.0028 |
1.0033 |
0.7730 |
113.29 |
130.95 |
|
Spot |
1.3682 |
1.5820 |
82.26 |
0.9424 |
0.9977 |
0.9966 |
0.7678 |
112.56 |
130.14 |
|
Support 1 |
1.3594 |
1.5734 |
81.81 |
0.9368 |
0.9926 |
0.9899 |
0.7626 |
111.83 |
129.33 |
|
Support 2 |
1.3550 |
1.5691 |
81.59 |
0.9340 |
0.9900 |
0.9866 |
0.7600 |
111.46 |
128.92 |
|
Support 3 |
1.3507 |
1.5648 |
81.36 |
0.9312 |
0.9874 |
0.9833 |
0.7574 |
111.10 |
128.52 |
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
