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Bullish EUR vs. Bearish JPY
The risk appetite remained well supported overnight; the US and Asian stock markets traded in green, while the currency markets did not see any major move. EUR and JPY traded in tight ranges in Asia, while the European opening gave boost to EUR. EURUSD jumped over 1.35, EURJPY and USDJPY rallied to fresh highs.
Today, the focus will remain on US major economic data and FOMC meeting’s outcome. We expect the FOMC to renew its Asset Purchase Program worth USD 40bn in mortgage bonds and USD45bn in Treasuries, and keep the policy rate unchanged at 0.25%. There will not be any press conference today, while an accompanying statement should push US stocks further.
EUR Rally extends JPY Weakness
The European opening gave boost to EUR, pushing EURUSD over 1.3550. The Asia was rather muted on EURUSD, as the 1.3490 / 35 resistance remained tight overnight. The morning EURUSD rally to 1.3537 triggered similar reaction in EURJPY and USDJPY. USDJPY tested 91.40 zone - a new high in USDJPY weakening, while EURJPY crossed over the 123.00 resistance, getting support by both legs.
Yen remains overbought (RSI at 71.15%), yet the technicals have insignificant impact on JPY trading. We remain bearish-Yen on the back of fundamentals, yet keep an eye on FOMC meeting outcome, which might trigger a correction on USDJPY rally.
In Europe, the Euro-Zone sentiment data was pretty in line with the expectations. The economic, industrial, consumer and services confidence improved in January as forecasted. While the ECB balance sheet is heading off to a year-low, the Spanish banks are committed to pay back EUR 544bn, borrowed from ECB.
BOK’s Reaction to the Weakening Yen
The combination of weaker Yen and stronger Won is an explosive cocktail for the Korean foreign demand. As the worries rise in Korea, the Minister of Finance, Choi, stated that “a potential FX tax would curb speculative capital inflow”. In reaction, Won wrote-off yesterday’s gains, pushing the currency under its 100-day MA. While the Won is almost considered overbought (RSI at 65%), the candle patterns creates a bearish belt hold line, signaling the uptrend exhaustion.
IMF says that Central Banks Continue to buy Gold
IMF announced that the Central banks keep buying Gold. The Russia occupies the first rank, while SNB would raise fees to kook after Gold, reported by Financial Times. Currently, the gold is trading at 1,660 / 70 zone, far behind the year-highs (1,796.08). We believe that gold has more room to the upside, as the political and economic uncertainty is from coming to an end.
2013-01-30T07:00:00 CHF Dec UBS consumption indicator; actual 1.34 last 1.23.
2013-01-30T08:00:00 EUR ESP Q4 GDP - prelim, actual -0.7% q/q, -1.87% y/y, exp. -0.6% q/q, -1.7% y/y; last -0.3%, -1.6%.
2013-01-30T08:00:00 CHF Jan KOF sentiment indicator, actual 1.05, exp.1.16; last 1.28.
2013-01-30T08:15:00 SEK Jan manufacturing confidence index; actual -18 last -15.0.
2013-01-30T09:00:00 EUR ITA Jan business confidence index, actual 88.2, exp. 89.5; last 88.9.
2013-01-30T09:30:00 GBP Dec BoE consumer credit, actual GBP 600mn, exp. GBP200 mln; last GBP100 mln.
2013-01-30T09:30:00 GBP Dec BoE mortgage lending, GBP 1bn, exp. GBP500 mln; last -GBP200 mln.
2013-01-30T09:30:00 GBP Dec BoE mortgage approvals, actual 55.8k, exp. 54.5k; last 54.0k.
2013-01-30T09:30:00 GBP Dec money supply M4; actual 0.7%, last -0.2%.
2013-01-30T10:00:00 EUR Jan business climate index, actual -1.09, exp. -1.0; last -1.12.
2013-01-30T10:00:00 EUR Jan economic sentiment index,actual 89.2, exp. 88.2; last 87.0.
2013-01-30T10:00:00 EUR Jan industrial sentiment index, actual -13.9, exp. -13.5; last -14.4.
2013-01-30T10:00:00 EUR Jan services sentiment index, actual -8.8, exp. -9.1; last -9.8.
2013-01-30T10:00:00 EUR Jan consumer sentiment index, actual -23.9, exp. -23.9; last -26.5.
2013-01-30T13:15:00 USD Jan ADP employment,exp.+165k, IFR +145k; last 215k.
2013-01-30T13:30:00 USD Q4 GDP - advance, exp. +1.1%, IFR +0.8%; last +3.1%.
2013-01-30T13:30:00 USD Q4 core PCE deflator - advance, exp. +1.0%, IFR +1.1%; last +1.1%.
2013-01-30T19:15:00 USD FOMC Rate Decision, exp. 0.24%, last 0.25%
EURUSD has surged past 1.3490 resistance through the psychological 1.3500 level (taking-out our 1.3492 target). There seems scant evidence, with indicators all significantly bullish and price above 1.3480, that we could see an meaningful, technically, driven correction. However, with the FOMC tonight we could see some short-term profit taking. The first level of resistance are located at 1.3550 (2nd Dec reaction high) then 1.3617 (18th Nov high). The next support is located at 1.3404 (14th Jan low), 1.3256 (Dec range floor), 1.3123 (65d MA & Uptrend channel), 1.2931 (11th Dec low), 1.2878 (7th Nov reaction high), 1.2787 (200d MA), 1.2722 (13th Nov pivot high), 1.2630/62 (3rd July high & 100d MA), 1.2463 (31st Aug low), and 1.2386 (14th & 17th Aug high).
GBPUSD hit a low of 1.5674 Monday, but has since rebounded to highs of 1.5760, however the recovery rally has failed to damage any important resistance. It is highly possible that the pair is merely mirroring the moves in EURUSD, in which case we may be reverting to a sideways, range-trading environment. In the mid-term, bearish momentum (MACD firmly below zero) / trend indicators should pull the currency down to 1.5574. The support zone is located at 1.5574 (9th Aug high), 1.5458 (26th July low), 1.5405 (8th June low), 1.5390 (6th June low), then 1.5266 (13th Jan low). Watch for next resistance to come into play at 1.5891 (21st Jan high), 1.6007 (18th Jan high), 1.5921 (200d MA), 1.6180 (10th Jan high), 1.6340 (2nd Jan high) and 1.6454 (29th Aug ’11 top).
USDJPY has resumed its bullish rise breaking 91.22 resistance at the European open. Pullbacks continue but are quickly met with strong demand. In the mid-term, despite one-directional rise we think fundamentals have set the course and expected an extension target of 92.49 (key will be this week FOMC and NFP). On the downside, support is eyed at 89.35 (11th Jan high), 88.88 (21d MA), 88.10 (23rd Jan low), 87.60 (16th Jan low), 86.64 (27th Dec high), 85.54 (5th April high), 84.23 (15th March high) 81.50/69 (15th Nov. high & 28th Nov. low), 81.00 (16th April pivot), 79.06 (9th Nov low), then 78.75 (8th Oct high). Above us, minor resistance remains at 91.22 (Jun 2010 high) then 92.09 (11th June high).
USDCHF broke below its triangle yesterday, but disappointingly failed to kick on into fresh downside territory as we had hoped. Instead running into support at downtrend channel top (0.9200). As such, we are now lingering around the 0.9200 levels and could be on course for a period of sideways consolidation. However, the break of support at 0.9214 and indictors bearish (MACD point downwards) suggest a deeper correction to 0.9170 area. The first levels of support should be located at 0.9170 (fibo lvl), 0.9085 (20th Dec low) then 0.9041 (1st May low). The next levels of resistance are located 0.9267 (29th Jan high), 0.9304 (100d MA), 0.9385 (18th Jan high), 0.9457 (21st Sept high), 0.9515 (13th Nov high & uptrend top), 0.9610 / 20 (26th Aug high), 0.9810 (10th Aug high & uptrend channel), 0.9900 (2nd Aug high), and 1.0000 (psychological resistance).