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Speculation that G7 may address the Yen weakness. BoE minutes show 5-4 vote on rate hike. Interest descends on Eurozone with the release of German IFO-Business climate. CURRENCY TRADING SUMMARY – 25 JANUARY 07 (23:30GMT)
- U.S. Dollar Trading (USD) strengthened against all other majors except for the Yen. Following a slower start to the week the economic data out of the US increases considerably as Existing Home Sales for the month of December being released today with market expectations at 6.25 million, down on the previous 6.28 million. Friday also sees important data releases, with New Home sales and Durable Goods Orders. Market expectations for New Home Sales are 1.05 million slightly higher than the previous 1.047 million. Durable Goods orders are forecasted to rise by 0.5% higher than the previous -1.1%. In other markets, the Dow Jones was up 87.97 points (+0.7%) and the NASDAQ was up 34.87 points (1.43%). Crude Oil rose slightly by US35c higher at US$55.35 a barrel.
- The Euro (EUR) dropped slightly against the USD as a result of heavy selling of the Dollar against the Japanese Yen. The EURUSD showed volatility as it traded within a low of 1.2948 and high of 1.3037 before closing at 1.2958 by the end of the New York session. Looking ahead, key data from the Eurozone is due to be released today in the form of the German IFO business climate index. The previous IFO (December) saw a result of 108.7 with market expecting that the will be rise to 109.00 in today’s index.
- The Japanese Yen (JPY) continues to have an eventful couple of weeks as it strengthened against the Dollar, following news of European finance ministers might be addressing the JPY weakness at next month’s G7 meeting. The Yen rebound started early in the Asian session with as investors unwound bets against the currency. Overall the USDJPY traded with a low of 120.65 and a high of 121.79 before closing at 120.95. Looking ahead, key data continues to be released from Japan, with announcements of the trade balance due to be released later on today. Markets are expecting a surplus of 1205.5 bln Yen compared to the prior 915.9 bln Yen. Friday also sees the Nationwide core CPI data being released with markets expecting a rise by 0.2% the same number seen in the prior release. Tokyo core CPI will also be released with market expectations being an increase in 0.2% the same as the previous. UPDATE: Japan trade balance surplus 1115.0 bln Yen.
- The Sterling (GBP) eased from the previous day of 14 year highs against the USD and JPY following doubts of a further rate hike. The BoE MPC minutes release showed that only 5 of its 9 members voted for the surprise interest rate hike this month, significantly closer than the expected 7 – 2 split predicted by the market. In the European session, the sterling pound received some support from data showing that the UK economy grew 0.8% in the final quarter of 2006 (fastest quarterly pace in 2.5 years) and above the 0.7% consensus forecast. Overall, the GBPUSD traded with a low 1.9645 and a high 1.9830 before closing at 1.9668 in the New York session.
- The Australian Dollar (AUD) slid with the release of the CPI for the fourth quarter coming in at -0.1% lower than the expected 0.2%. The drop was largely due to the unlikelihood of any future rate hikes, as investors sought to sell. Overall the AUD traded with a low of 0.7793, a high of 0.7926 and closed at a 0.7802 in the New York session.
- Gold (XAU) slipped nearly 1% during the European session due to strength in the dollar and weaker oil prices. Gold rose by US$2.50 an ounce to US$648.40.
TECHNICAL COMMENTARY | Currency | Sup 2 | Sup 1 | Spot | Res 1 | Res 2 | | EUR/USD | 1.2897 | 1.2928 | 1.2955 | 1.3054 | 1.3117 | | USD/JPY | 120.06 | 120.63 | 121.05 | 121.81 | 122.38 | | GBP/USD | 1.9571 | 1.9636 | 1.9670 | 1.9833 | 1.9917 | | AUD/USD | 0.7759 | 0.7781 | 0.7795 | 0.7940 | 0.7982 | | XAU/USD | 623.93 | 632.20 | 648.80 | 648.20 | 649.95 |
Initial support at 1.2928 (Jan 23 low) followed by 1.2897 (Jan 18 low). Initial resistance is now located at 1.3054 (Jan 9 high and 38.2% of 1.3368 to 1.2865) followed by 1.3117 (50% retracement of the 1.3368 to 1.2865 decline). Initial support is located at 120.63 (Jan 24 low) followed by 120.06 (Jan 15 corrective low). Initial resistance is now at 121.81 (Jan 22 high) followed by 122.38 (61.8% retracement of the 135.18 to 101.67 decline) Initial support at 1.9636 (Jan 18 low) followed by 1.9571 (Jan 15 low). Initial resistance is now at 1.9833 (Jan 24 high) followed by 1.9917 (Jan 23 trend high) - Australian Dollar – 0.7795
Initial support at 0.7781 (Jan 12 low) followed by 0.7759 (Jan 10 low). Initial resistance is now at 0.794 (Jan 23 high) followed by 0.7982 (Jan 3 trend high). Initial support at 632.20 (Jan 22 low) followed by 623.93 (Jan 18 low). Initial resistance is now at 648.20 (Jan 23 high) followed by 649.95 (Dec 1 high) Forex trading involves substantial risk of loss, and may not be suitable for everyone. 
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| This article provides an overview of the factors affecting the the leading currency pair: Euro-Dollar exchange, commonly expressed as EUR/USD. The Euro to Dollar exchange rate is the
price at which the world demand for US Dollar equals the world supply for Euro. Regardless of geographical origin, a rise in the world demand for Euros leads to an appreciation of the Euro. |
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Technical analysis is built on three essential principles:
1. Market action discounts everything This means that the actual price is a reflection of everything that is known to the market that could affect it, for example,
supply and demand, political factors and market sentiment. The pure technical analyst is only concerned with price movements, not with the reasons for any changes.
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