It will be very interesting to see how the USD will react to today's data as we still remain puzzled to why we did not see further USD-strength on back of yesterdays Fed statement.

MAJOR HEADLINES – PREVIOUS SESSION

The USD lost ground after the FOMC statement last night and broke above 1.2980. Despite the solid Q4 growth figures, released earlier yesterday, members of the Fed did not to our surprise express any concern about the inflation in the US economy. The annualized GDP came out at 3.5 pct. vs. 3.0 pct. expected, and the GDP Price Index came out as expected at 1.5 pct. Personal consumption also met market expectations at 4.4 pct. vs. 2.8% prior. Ahead of the FOMC statement, the EURUSD grinded higher on disappointing figures from the December construction spending and the January Chicago PMI. We believe that the risk in the EURUSD is to the upside at the moment, and the release of the monthly and yearly PCE Core will confirm if we will see higher levels. Expectations in the market are that the monthly figures will rise 0.2 pct. and the yearly figure will show a 2.2 pct. increase. Later we also have the ISM Manufacturing index, expected at 51.7 and the ISM Prices Paid, expected at 47.0. As we head into these figures and with tomorrow's US January job market report in mind, we believe that the use of options will be favoured in the short term as we expect a lot of volatility in the market at the time surrounding the figures. We have bought a 1-day EURUSD call, which is elaborated on in Trading Strategies under Research on the trading platform.

From Yesterday:

Today is the day that the market have been waiting for in a long time. We are off course talking about the GDP and the Core PCE figures for the fourth quarter of 2006. Market expectations poit towards an increase in the Annualized GDP of 3.0 pct. vs. 2.0 pct. prior, while the GDP Price Index is expected to drop to 1.5 pct. from 1.9 pct prior. We are expecting that the figures could surprise to the upside, sending the EURUSD lower. Tonight we have the FOMC announcing rates, where we expect the leading rate unchanged at 5.25 pct. Tomorrow the PCE Deflator and Core YoY figures are released, and Friday we have the Job Report for January. This means that we expect the volatility to pick up regarding USD-related crosses, but most of all the EURUSD.

FX Order Book

Note: the support/resistance levels used in the matrix's of this document are levels derived from yesterday high, low and close. Reference in the text to other support/resistance levels will occur.

Euro/US Dollar

( 1.3018 - 13:06 GMT, Feb 01, 2007 )

Support

  1. 1.2980 upper end of 6-month range
  2. 1.2765 key support for rising wave lows.
  3. 1.2460 daily base support

Resistance:

  1. 1.3367 highs from early December.
  2. 1.3480 old top from March 2005.
  3. 1.3190 Congestion zone through holiday trading.

British Pound/US Dollar

( 1.9678 - 13:06 GMT, Feb 01, 2007 )

Support:

  1. 1.9500 January 2005 old top.
  2. 1.9190 November's 2006 breakout level.
  3. 1.8950 wave lows from late November 2006.

Resistance:

  1. 1.9750 Double top from December 2006.
  2. 1.9916 highs from 2007.
  3. 2.0100 highs from August 1992.

US Dollar/Japanese Yen

( 120.45 - 13:06 GMT, Feb 01, 2007 )

Support:

  1. 114.45 wave low from December 2006.
  2. 113.35 weekly base support.
  3. 109.00 key support form confirmation of a monthly downward trend.

Resistance:

  1. 119.90 old top from mid-October.
  2. 121.40 old top from December 2005.