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US Dollar drops following poor data for TIC flows, Philly Fed and Industrial Production. Weak UK retail sales cause GBP to spiral. Housing starts & Core PPI out of US. CURRENCY TRADING SUMMARY – 16 FEBRUARY 07 (23:30GMT)
- U.S. Dollar Trading (USD) dropped on Thursday against all other majors bar the GBP despite vigorous comments made by Ben Bernanke implying an interest rates hike if inflation moved higher. Bernanke warned that the US economy might be stronger than it appears during his address to congress. In other news, production data was conflicting with the NY Fed Manufacturing index coming in significantly better than expected at 24.35 (Previous: 9.13, Forecast: 10.0) whilst the Philly Fed and Industrial production were softer coming in at 0.6 (Previous: 8.3, Forecast: 5.0) and -0.5% (Prior 0.4%, Forecast: 0%) respectively. In further poor data released out of the US, TIC Flows were weaker than the expected figure of 72.50 bln and the previous number of 68.4 bln coming in at 15.6 bln. Finally, Jobless claims were also made public with a release of a worse than expected figure of 326.25k with the previous revised higher at 308.75k. In US share markets, the NASDAQ rose by 8.72 points (0.35%) whilst the Dow Jones was also up 23.15 points (0.18%). Crude oil dropped last night by US$0.05 a barrel to US$57.95. Looking ahead, in what continues to be a heavy data week for the US, there is no relenting on Friday. Core PPI is out with markets forecasting an unchanged figure of 0.2%, whilst Housing Starts is also scheduled for release with economists expected a softer number of 1600k than the prior 1642k. Finally, Michigan Sentiment for the month of February also set for release with the expectations surrounding a slightly stronger figure of 97.0 than the previous 96.9.
- The Euro (EUR) remained steady on Thursday against the USD trading within a range of a low 1.3119 and a high of 1.3173 before closing the day at 1.3143 in the New York session. Looking ahead the Eurostat Trade Balance for the region is out today with markets expecting a softer figure of 2.50 bln than the previous 3.10 bln.
- The Japanese Yen (JPY) strengthened against the USD following an impressive GDP figure. As economists were predicting a figure of 0.9%, the actual figure was released at a much better 1.2%. This added to the likelihood of the BoJ raising interest rates as early as next Tuesday causing investors to buy JPY. Overall the JPY traded within a range of a low 119.17 and a high of 120.78 before closing at 119.19 in the New York session.
- The Sterling (GBP) dropped last night following a poor Retail Sales figure. With the market expecting a figure of 0.10 significantly lower than the previous figure of 1.10% the actual figure came in much worse at -1.8%. Despite the BoE inflation report suggesting a liking to another hike, the poor Retail Sales number added to the weaker than expected January CPI, lengthened odds of any near term rate hike. As a result investors sought to sell off the GBP. Overall, the GBP traded with a low 1.9508 and a high of 1.9674 before closing near day lows at 1.9510 in the New York session.
- The Australian Dollar (AUD) strengthened against the Dollar following poor economic US data. Overall the AUD traded within a range of a low 0.7828 and a high 0.7864 before closing at 0.7844. .
- Gold (XAU) fell by US$0.10 and ounce to US$667.30 ending largely unchanged.
TECHNICAL COMMENTARY | Currency | Sup 2 | Sup 1 | Spot | Res 1 | Res 2 | | EUR/USD | 1.2940 | 1.3024 | 1.3140 | 1.3176 | 1.3196 | | USD/JPY | 118.32 | 119.14 | 119.25 | 120.79 | 121.37 | | GBP/USD | 1.9317 | 1.9402 | 1.9510 | 1.9679 | 1.9751 | | AUD/USD | 0.7707 | 0.7784 | 0.7840 | 0.7867 | 0.7883 | | XAU/USD | 648.00 | 657.30 | 669.80 | 672.00 | 676.35 |
Initial support at 1.3024 (Feb 14 low) followed by 1.2940 (Feb 12 low). Initial resistance is now located at 1.3176 (61.8% retracement of 1.3368-1.2865 decline) followed by 1.3196 (76.4% retracement of 1.3298 to 1.2865 decline). Initial support is located at 119.14 (Jan 9 reaction high) followed by 118.32 (50% retracement of the 114.43 to 122.20 advance). Initial resistance is now at 120.79 (Feb 15 high) followed by 121.37 (Feb 14 high). Initial support at 1.9402 (Feb 13 low) followed by 1.9317 (Jan 11 corrective low/ 1.9295 trendline). Initial resistance is now at 1.9679 (Feb 15 high) followed by 1.9751 (61.8% of 1.9917-1.9482, 1.9749 id Feb 2 high). - Australian Dollar – 0.7840
Initial support at 0.7784 (Feb 14 low) followed by 0.7707 (Feb 12 low). Initial resistance is now at 0.7867 (Feb 15 high) followed by 0.7883 (76.4% retracement of the 0.7940 to 0.7697 decline). Initial support at 657.30 (Feb 9 low) followed by 648.00 (Feb 8 low). Initial resistance is now at 672.00 (Feb 14 high) followed by 676.35 (Jul 17 reaction 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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