Weekly Summary - 18th January , 2010

Last week’s currency trading review

The Dollar was mixed losing ground against most currencies until Friday when the pair made substantial gains on the back of risk aversion when US stock markets pulled back. Data was soft with December Retail Sales falling -0.3% vs. 0.4% forecast. December CPI at 0.1% vs. 0.2% previously. UoM Consumer Sentiment at 72.8 vs. 73.8. The Euro led the fall on Friday as the market focused on Greece's Debt problems and and the EUR/USD broke support on the downside. EUR/JPY was the worst hit as the Euro's reserve currency status was threatened by disunity inside the Eurozone. ECB held rates at 1.0%. The EUR/USD fell -0.15% closing at 1.4387, after opening the week at 1.4409.

The Japanese Yen was the strongest currency as the recent rally on the crosses was sold off and risk aversion picked up on Friday's stock market losses. Adding to the Yen strength was the Bank Reserve Rate hike from China on Tuesday seen by some as a prelude to more Chinese economic tightening and possible Yuan strength. Many in the market play the Yen as a proxy for the Yuan and correlation could emerge as a major player later in the year. The USD/JPY fell -2.07% closing at 90.77 after opening the week at 92.65. The GBP outperformed most currencies as the heavily beaten down currency began to rebound and EUR/GBP selling provided solid support. November Trade Balance improved to -6.8bn vs. -7.0bn previously. GBP/USD gained 1.49% closing at 1.6263 after opening at 1.6021. The AUD was hurt by the China Reserve Rate hike as the Aussie economy is enjoying the major expansion seen in the Chinese economy and its effects on the consumption of Australian commodities. Helping the Aussie was December Jobs which soared 35k vs. 10k forecast and Unemployment fell to 5.5% vs. 5.7% previously. The AUD/USD fell -0.24% closing at 0.9223 after opening at 0.9245.

The forex trading week preview

In the States; Bank Holiday Monday. On Tuesday, Bank of Canada Rate decision forecast to remain at 0.25%. Also released, November Long Term TICS Flows forecast at 30bn vs.20.7bn previously. On Wednesday, December PPI is forecast at 4.6% y/y vs. 2.4% previously. Also released, December Housing Starts forecast at 575k vs. 574k previously. On Thursday, Weekly Jobless claims are forecast at 440k vs. 444k previously. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; On Tuesday, German January Zew Survey is forecast at 50.0 vs. 50.4 previously. On Friday, January EU PMI service is forecast at 53.9 vs. 53.7 whilst manufacturing is forecast at 51.8 vs. 51.6 previously. In the UK; On Tuesday, December CPI is forecast at 2.5% vs. 1.9% previously. On Wednesday, BOE minutes released. Also, December Jobless Claims are forecast at 0k vs. -6.3k previously. On Friday, December Retail Sales are forecast at 3.0% vs. 3.1% previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; On Friday, November All Industry Activity Index is forecast at 0.1% vs. 1.2% previously. In Australia; Light data week with January Consumer sentiment on Tuesday the highlight. Also released, November Retail Sales are forecast at 0.5% vs. 0.3% previously. We will provide our previews and reviews of these data releases in the daily summary.

TECHNICAL COMMENTARY

• Euro – 1.4360

  Initial support at 1.4303 (0.764 of 1.4218-1.4579) followed by 1.4258 (Jan 4 low). Initial resistance is now located at 1.4579 (0.382 of 84.83-93.77) followed by 1.4591 (Dec 16 high)

• Yen – 90.90

  Initial support is located at 90.36 (Jan 13 low) followed by 90.16 (Dec 21 low). Initial resistance is now at 92.05 (Jan 12 high) followed by 92.66 (Jan 11 high).

• Pound – 1.6285

  Initial support at 1.6211 (Jan 15 low) followed by 1.6137 (Jan 13 low). Initial resistance is now at 1.6411 (Dec 16 high) followed by 1.6477 (Dec 8 high).

• Australian Dollar – 0.9220

  Initial support at 0.9171 (Jan 12 low) followed by the 0.9124 (Jan 8 low). Initial resistance is now at 0.9328 (Jan 14 high) followed by 0.9406 (Nov 16 high).

• Gold – 1131

  Initial support at 1126 (Jan 15 low) followed by 1115 (Jan 5 low). Initial resistance is now at 1146 (Jan 14 high) followed by 1161 (Jan 11 high).

• Oil – 78.05

  Initial support at 78.00 (Intraday support) followed by 77.00 (Intraday Support). Initial resistance is now at 80.00 (Intraday Resistance) followed by 82.00 (Intraday Resistance).