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The euro depreciated vis-à -vis the U.S. dollar today as the single currency tested bids around the US$ 1.3775 level and was capped around the $1.3860 level. Technically, today’s intraday low was below $1.3880, representing the 23.6% retracement of the $1.2587 – $1.4280 range. Dealers were unable to push the pair through the next level of key technical resistance and drove the common currency to intraday lows during the North American session. The catalyst for the lower euro was a downgrade of Ireland’s credit rating by Standard & Poor’s which reported its negative Irish outlook reflects “our view of the uncertainties surrounding the size of Ireland’s additional capital needs for its largely state-owned financial sector.†Traders were also unable to push the pair higher after a media report emerged that Germany has ruled out allowing the European Financial Stability Facility to purchase bond buybacks. A German official reported EFSF, currently €440 billion in size, does not have the legal authority to purchase outstanding eurozone debt in the secondary market. European Union officials will convene a summit on 4 February and this issue will be discussed. Traders are also paying close attention to Egypt where President Mubarak yesterday announced he will not run for re-election later this year but opposition forces are calling that concession inadequate. Data released in the eurozone today saw EMU-16 December producer price inflation up 0.8% m/m and 5.3% y/y. German and French PMI services data will be released tomorrow. In U.S. news, data released today saw MBA mortgage applications reverse course and climb 11.3%. January Challenger job cuts were off 46.1% y/y while the January ADP private payrolls number expanded 187,000, more-than-expected but down from the downwardly-revised prior reading of 247,000. The major economic news this week will be on Friday when the January non-farm payrolls data are released and many forecasts are focusing on jobs growth around 140,000 with the unemployment rate around 9.5%. Many data will also be released tomorrow including January ISM services and December factory orders. Euro bids are cited around the US$ 1.3610 level.
Â¥/ CNY
The yen depreciated vis-à -vis the U.S. dollar today as the greenback tested offers around the ¥81.85 level and was supported around the ¥81.35 level. Technically, today’s intraday high was just below the 61.8% retracement of the ¥80.24 – 84.50 range. Bank of Japan Policy Board member Kamezaki reported “There’s a high chance Japan’s economic slump will end quickly and the nation will return to a moderate growth path (around spring).†Kamezaki also added “The pause in the yen’s advance is also contributing†to the market’s perception of an economic recovery. He further verbally intervened saying “Foreign exchange movements can have a big effect on corporate and household sentiment as well as profits and we will carefully watch these moves. It’s always undesirable for currency to move rapidly.†He called on Japanese officials to address the country’s expanding debt burden and said Japan cannot view Europe’s fiscal problems as “a house burning on the other side of a river.†Moreover, he said “Financial markets have reacted calmly†to the downgrade in Japan’s credit rating to AA- by Standard & Poor’s last week. Regarding consumer prices, Kamezaki added he is “confident the economy is making progress toward ending deflation.†Data released in Japan overnight saw the January monetary base up 5.5% y/y, down from the prior reading of +7.0% y/y. There are no additional major Japanese economic data scheduled for release this week. Bank of Japan Governor Shirakawa was this week quoted as saying the central bank’s commitment to keeping rates near zero per cent will keep bond yields stabile as the economy strengthens. Shirakawa also suggested the yen appreciated the second half of last year because investors perceived it to be a “relatively stable†asset. U.S. dollar offers are cited around the ¥84.60 level. The euro moved lower vis-à -vis the yen as the single currency tested bids around the ¥112.20 level and was capped around the ¥112.90 level. The British pound moved higher vis-à -vis the yen as sterling tested offers around the ¥132.30 level while the Swiss franc moved higher vis-à -vis the yen and tested offers around the ¥87.35 level. In Chinese news, the U.S. dollar depreciated vis-à -vis the Chinese yuan today the greenback closed at CNY 6.5850 in the over-the-counter market, down from CNY 6.5962. Data to be released in China tonight include January non-manufacturing PMI. The media reported China is expected to raise official interest rates within a month. Data released in China earlier this week saw January manufacturing PMI fall to 52.9 from the prior reading of 53.9 while HSBC manufacturing PMI ticked higher to 54.5. PBoC adviser Li this week reported the Chinese economy will continue to expand at a clip of at least 9.5% and said the inflation rate may exceed 5% in the first quarter. People’s Bank of China Governor Zhou warned China may need to raise reserve requirements to reduce capital inflows, adding inflation is “still higher than many people expected.†The State Administration of Foreign Exchange reported China’s 2010 current account surplus rose 25% y/y to US$ 306.2 billion while the 2010 capital account surplus printed at US$ 165.6 billion. Liquidity is expected to remain muted during the current Chinese New Year holiday.
£
The British pound appreciated vis-à -vis the U.S. dollar today as cable tested offers around the US$ 1.6230 level and was supported around the US$ 1.6125 level. Technically, today’s intraday high was below the $1.6255 level, representing the 76.4% retracement of the $1.6882 – 1.4229 range. Data released in the U.K. today saw January PMI construction improve to 53.7 from the prior reading of 49.1. Sterling moved higher following hawkish comments from Bank of England Monetary Policy Committee officials. Deputy Governor Bean reported “We may well have to respond to (higher commodities prices) by keeping domestically-generated inflation lower. Whether it dents confidence depends on why it happens: if we raise rates because the economy is growing quite strongly and the recovery is entrenched then that’s a ‘nice’ rise in interest rates and unemployment will be coming down. On the other hand if it is in response to a spike in oil prices that we think is likely to persist and inflation is becoming embedded that is not a nice reason to raise interest rates, but we would have to do it. That certainly could be one driver of a change in interest rates if we thought it materially affected the medium-term outlook.†MPC member Sentance was also hawkish saying once the inflation “genie is out of the bottle,†the U.K. will face a “hard and painful†job of achieving price stability. NIESR yesterday reported the central bank is likely to raise rates three times this year to 1.25% by the end of 2011. Cable bids are cited around the US$ 1.5965 level. The euro depreciated vis-à -vis the British pound as the single currency tested bids around the £0.8510 level and was capped around the £0.8575 level.
CHF
The Swiss franc depreciated vis-à -vis the U.S. dollar today as the greenback tested offers around the CHF 0.9395 level and was supported around the CHF 0.9435 level. Technically, today’s intraday high was above the CHF 0.9414 level, representing the 76.4% retracement of the CHF 1.0065 – 0.9299 range. Data released in Switzerland this week saw December retail sales off 0.4% y/y while the January PMI survey ticked lower to 60.5. Other Swiss data to be released this week include the December trade balance and January foreign currency reserves. Former Swiss National Bank Chairman Roth was quoted as saying “The problem is less in the advance of the franc but with the speed of the movement in 2010. But wouldn’t the situation have been even worse if the SNB hadn’t intervened? Those who now criticize its actions should look at the facts and measure the associated risks.†Earlier this week, SNB member Jordan verbally intervened against the franc’s strength saying “For Switzerland’s export industry, such a strong franc is a big and barely tolerable burden. Given the importance of the export sector for the overall economy, its problems are also showing a negative impact on overall economic growth.†Jordan added “a significant overshooting†of the franc could threaten “the existence of basically sound companies.†U.S. dollar offers are cited around the CHF 0.9540 level. The euro depreciated vis-à -vis the Swiss franc as the single currency tested bids around the CHF 1.2870 level while the British pound moved higher vis-à -vis the Swiss franc and tested offers around the CHF 1.5225 level.
Technical Outlook at 1330 GMT (EST + 0500)
(Bid Price) (Today’s Intraday Range)
EUR/ USD 1.3800 1.3860, 1.3777
USD/ JPY 81.51 81.59, 81.34
GBP/ USD 1.6186 1.6230, 1.6127
USD/ CHF 0.9359 0.9396, 0.9327
AUD/USD 1.0073 1.0133, 1.0065
USD/CAD 0.9879 0.9915, 0.9868
NZD/USD 0.7807 0.7823, 0.7787
EUR/ JPY 112.52 112.90, 112.19
EUR/ GBP 0.8526 0.8576, 0.8512
GBP/ JPY 131.91 132.30, 131.19
CHF/ JPY 87.08 87.34, 86.75
Support Resistance Support Resistance
EUR/ USD USD/ JPY
L1. 1.3575 1.3880 81.55 84.60
L2. 1.3360 1.4025 80.80 85.85
L3. 1.3275 1.4425 79.30 87.30
GBP/ USD USD/ CHF
L1. 1.5810 1.6190 0.9320 0.9775
L2. 1.5645 1.6300 0.9145 0.9965
L3. 1.5320 1.6430 0.8860 1.0120
AUD/ USD USD/ CAD
L1. 0.9820 1.0170 0.9785 1.0140
L2. 0.9720 1.0365 0.9590 1.0355
L3. 0.9540 1.0440 0.9480 1.0585
NZD/ USD EUR/ JPY
L1. 0.7455 0.7840 110.40 114.25
L2. 0.7380 0.7975 109.60 115.65
L3. 0.7210 0.8220 107.20 118.05
EUR/ GBP EUR/ CHF
L1. 0.8375 0.8705 1.2810 1.3115
L2. 0.8260 0.8820 1.2735 1.3285
L3. 0.8110 0.8910 1.2560 1.3495
GBP/ JPY CHF/ JPY
L1. 129.00 135.70 85.50 89.75
L2. 127.10 138.10 84.00 90.90
L3. 125.60 139.85 82.20 92.30
SCHEDULE
Wednesday, 2 February 2011
all times GMT
(last release in parentheses)
0001 UK BRC shop price index
0130 Japan Bank of Japan Policy Board member Kamezaki speaks
0930 UK January PMI, construction (49.1)
1000 Eurozone December producer price index (0.3% m/m)
1000 Eurozone December producer price index (4.5% y/y)
1200 US MBA mortgage applications
1230 US January Challenger job cuts (-29.0% y/y)
2145 NZ Q4 participation rate
Thursday, 3 February 2011
all times GMT
(last release in parentheses)
0030 Australia December building approvals (-4.2% m/m)
0030 Australia December building approvals (-9.9% y/y)
0230 China January HSBC PMI, services
0715 CH December trade balance
0815 France January PMI, services
0845 Italy January PMI, services
1000 Eurozone December retail sales (0.1% y/y)
1245 Eurozone European Central Bank interest rate decision
1330 US Q4 unit labour costs (-0.1%)
1330 US Weekly initial jobless claims
1330 US Continuing jobless claims
1330 US Q4 non-farm productivity (2.3%)
1500 US December factory orders (0.7%)
1800 US Federal Reserve Chairman Bernanke speaks
Friday, 4 February 2011
all times GMT
(last release in parentheses)
0500 Germany December import price index (1.2% m/m)
0500 Germany December import price index (10.0% y/y)
0500 UK January Halifax house prices (-1.3% m/m)
1000 Italy January consumer price index
1200 Canada January employment, net change (22,000)
1200 Canada January unemployment rate (7.6%)
1330 US January non-farm payrolls, net change (103,000)
1330 US January unemployment rate (9.4%)
1330 US January average weekly hours worked (34.3)
