FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400)
USD
The dollar weakened during the Asia session, clocking up losses against the euro, the AUD, and the NZD. USDJPY remained tightly range-bound all night and traded 82.21-82.45. EURUSD traded 1.3544-1.3636. The S&P 500 continued its advance and finished 0.6% higher, despite thin news flow. The attention now shifts to Federal Reserve speakers, with Regional Fed Presidents Lacker (Richmond), Lockhart (Atlanta) and Fisher (Dallas) scheduled to speak. Fisher and Lacker are more hawkish and Lockhart and Lacker are non-voters this year, but their interpretation of the latest Bureau of Labor Statistics data could be an important near-term driver of the dollar. Non-voting members still participate in FOMC discussions and Lacker and Lockhart will rotate into voting positions in 2012. Fisher has already said he would be unlikely to support more easing beyond QE2 and given the current biases of these three, we could see the greatest USD reaction, if any, from Lockhart should he move away from his more neutral, cautious stance. Our economists believe payrolls should bounce back to their firm underlying trend, with some additional “payback” potentially ahead.
EUR
ECB Governing Council member Mersch said inflationary pressures have undoubtedly risen and the ECB would have to intervene if there were secondary effects from higher commodity prices. Mersch also said the ECB could hike interest rates without first exiting liquidity support measures. Mersch added that the EFSF should be able to buy bonds directly.
Irish Finance Minister Lenihan said he is negotiating with his European counterparts on the question of whether haircuts can be imposed on Irish senior bank debt which is not government guaranteed. He said the “debate is underway”.
GBP
Sterling received a brief boost on the news that the RICS house price balance strengthened to -31% in January from -39% in December. It remains in negative territory however, indicating that UK house prices are still tending to fall.
AUD
Business conditions in January showed a steep drop across employment intentions, forward orders, and capacity utilization. Our economists note that this is not entirely surprising given the impact of the Queensland floods. The AUD soon recovered from the news.
TECHNICAL OUTLOOK
USDJPY 80.93 support.
EURUSD BULLISH Focus is on 1.3741, break of this is required to refocus towards 1.3862 recent high while support lies at 1.3482.
USDJPY BEARISH Violation of 80.93 would expose 80.54 next. Resistance at 82.93.
GBPUSD BULLISH Initial resistance at 1.6186 ahead of 1.6279/99 zone. Near-term support is defined at 1.6037.
USDCHF NEUTRAL 0.9623 and 0.9329 mark the near term directional triggers.
AUDUSD BULLISH Focus is on 1.0200/56 resistance zone. Support lies at 1.0083.
USDCAD BEARISH The pair targets 0.9832/20 support zone. Near term resistance at 0.9932.
EURCHF BULLISH Pressure on 1.3069; move above this would open up the way towards 1.3118. Support at 1.2867.
EURGBP BEARISH Move below 0.8377 is required to confirm the negative trend. Resistance is at 0.8477.
EURJPY BULLISH Focus is on 112.92, break of this would confirm the uptrend and expose 114.01 next. Support zone is at 110.78/32.
SCHEDULE
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