NY SESSION: Short term price action driven by jawboning

The dollar is trading mixed amid a lack of economic data releases and after commentary from central bank officials. Fed Vice Chair Janet Yellen spoke on the economy today and Bundesbank President and ECB Governing Council member Jens Wiedmann discussed the euro. Earlier comments from Japanese officials weighed on the yen today as potential Bank of Japan candidate Kuroda said that additional easing can be justified for 2013. USD/JPY climbed higher to nearly test the 94.00 figure. We would caution against further yen declines in the short term as the BoJ meeting later this week is unlikely to provide any new easing measures and despite the dovish comments from Kuroda, he has not yet been nominated as the next BoJ head.

The Fed’s Yellen said that the inflation and jobs thresholds are not policy triggers and that higher rates are not assured after the economic thresholds are crossed. She spoke favorable of QE, saying that it is helping to boost economic growth, however she noted that job market progress is “too slow”. US treasury yields are mostly flat to marginally higher after the comments from the Fed official.

ECB’s Weidmann said the euro is not seriously overvalued. He warned policymakers against trying to weaken the currency indicated that targeting a weaker euro would fuel inflation. The Bundesbank head said that the ECB has done enough to combat the debt crisis and that it is up to governments to solve the crisis. EUR/USD rose following the comments but was rejected from the 21-day SMA and Friday’s highs around the 1.3425/30 area. EUR/USD is trading in a short term bearish channel after testing long term bullish channel resistance around the 1.37 figure (see chart below). Key support is currently around the 55-day SMA which is around the 1.3230 level.

US equities finished the day slightly lower with the Dow Jones Industrial Average falling by about -0.16% and the S&P 500 declining by around -0.06%. Precious metals traded heavy as gold and silver are currently down by about -1.05% and -1.25% respectively.

Data watch

New Zealand house sales as measured by REINZ showed a yearly increase of21.1% in January while the housing price index fell by  -1.0% to 3488.1 from the prior month. New Zealand January card spending figures are due out shortly followed by Japan’s January money stock data, consumer confidence and machine tool orders. NAB business conditions and confidence readings for December are set for release in Australia in tonight’s Asia/Pacific session as well.