Good morning from beautiful but cold Hamburg. Ice at Elbe starts melting but Hamburg is still cold and wet. However, a new week started and the FX market could stay volatile during the week. We wish you a successful start in this new trading week.
Market review
The JPY fell to a one-week low against the EUR and decreased against the USD on speculations that government efforts to rescue ailing banks could revive global credit markets. The JPY also fell for a third day against the AUD and a second versus the NZD while a lot of investors expect that U.S. President-elect Barack Obama will bring back an increased financialrescue effort. It should inject capital into banks, which should boost the demand for higheryielding assets. According to people who are familiar with the matter, Obama’s team says they will use part of the remaining $350 billion Trouble Asset Relief Program to slow down foreclosures.
On Friday the Bank of America and Citigroup both reported multibillion dollar quarterly losses. Citigroup also said it could split into two operation units. However, some analysts say the FX market is cautious about the sustainability of gains in share prices while the global economy is still in a severe situation. The EUR/USD advanced to 1.3344 from 1.3267 at the end of last week while the GBP/USD climbed to a high of 1.4874 from 1.4733. Trading may be more subdued than usual today because of the “Martin Luther King Day” in the United States, some traders say.
EUR/USD
Since the end of December the EUR/USD has been trading in a bearish trend channel with a short breakout at the beginning of the year. Currently the market is trading very close to the upper trend line. If the USD will be strong enough the market could make a pullback towards the lower trend line of the channel.
USD/JPY
Since the middle of September the USD/JPY has been trading along a bearish trend line. At the beginning of the year the currency pair broke the line and set its high at 95.00. The market recovered and is trading around the horizontal support line at 90.90. If the currency pair breaks trough this line effectively, it could raise further towards the resistance level at 95.00.
