US Markets Closed Fore President Day, Low Liquidity Expected.
Economical News
USD
Is it possible that the US economy is moving forward and backwards at the same time? Does it make sense that inflation pressures decrease and accelerate simultaneously?
Well, according to the Fed's Chairman, Ben Brenanke it is!
A few days ago, on Wednesday the 14th, the USD fell sharply against the majors when Brenanke was speaking in front of the Senate. Why? Because according to the FEDs, inflation pressure is fading out and growth is moderate - that of course was valid for Wednesday.
24 hours later, while making the same speech to the Congress, the US economy was already growing "stronger than we think" with some fears regarding inflation.
If we will ignore Bernanke's testimony and check out last week's US data we can definitely agree that another rate hike is nearly impossible. Take for example the trade balance (above the 60B level once again), negative net capital flow, soft retail sales, industrial production, Philadelphia survey and drop of 14% in housing starts - "is this a stronger than we thing economy" - We don't think so…
It seems like Brenanke realized how powerful words can be sometimes and tried to fix the damage a day later in front of the Congress.
As for this week, it should be a relatively quiet week that is characterized by low liquidity and no distinct market shakers, where all eyes will be on the CPI and FOMC minutes due on Wednesday that will probably produce small market action. Today, US markets are closed for President's Day
EUR
In the Euro-zone, Q4 GDP growth largely exceeded expectations indicating that the Euro-zone economy has entered 2007 with quite some momentum. The EUR gained its confidence also from the ZEW survey but mostly from the ECB rate decision as the ECB President Trichet open the way for another rate hike in March (3.75%) with his "Vigilance" mantra.
The strong performance of the European economy contrasted last week with a softer outlook in the US causing the EUR/USD to break out of the narrow pattern developed in recent weeks. However, we witnessed before that such a move quickly faded and we wonder if this time it will be different.
As for today, no data is expected from the Euro-Zone, and together with a closed US, we should not expect any radical price movement coming from the major currencies, as the market will probably float in a tight range. This might be a good opportunity for pure technical trading, as there are no macro events that could shift the markets.
JPY
The Q1 GDP released last week reveled that the Japanese economy is growing at a higher pace than expected. The 1.2% growth Q/Q and the 4.8% Y/Y suggest that a rate hike is in play during this week's BoJ meeting (February 21st). The impact of the data was clear as all JPY pairs fell sharply.
Actually, the GDP impact was so strong that traders quickly forgot the G7 meeting in Germany, only 48 hours earlier. In the G7 statement, there was no referral to the JPY weakness, however, the statement sent a hint to the BoJ officials saying "Japan's recovery is on track and is expected to continue. We are confident that the implications of these developments will be recognized by market participants and will be incorporated in their assessments of risks".
So without a doubt, this week is also JPY-centric with rate decision and other economic news to be released. The question is whether the JPY recent trend rate will continues after the 2% appreciation against the USD and GBP, or it will slow down a bit, as next week will probably supply good answers for most of those questions, and give us a clearer view of the JPY's near future.
Technical Analysis
EUR/USD
The pair is floating in the 1.3150 zone and it looks like 1.3175, the Jan 4 high and 61.8% of 1.3365/1.2870 move might be breached today. Daily studies are slightly bullish, with room to extend before overbought hourly levels kick in.
GBP/USD
The pair is currently in the middle of a very choppy downtrend that started January 23rd. although the market is giving mixed signals, it appears that a further move south will be happening very soon. If the market will violently cut through 1.9480, then the move will probably continue.
USD/JPY
It has been a very persistent downtrend for the USD/JPY throughout last week, as we have seen the pair depreciate from 122.00 to 119.30. The momentum seems to be very bearish and the ongoing market sentiment is towards a stronger JPY. The hourly studies support the notion, and the next target price is around the 118.40.
USD/CHF
The downtrend initiated February 13th seems to be very stable. The daily studies are very bearish, as the hourlies are reaching oversold levels. If the pair breaks through 1.2300, we might see the trend continuing towards the 1.2200 levels.
Wild Card
GBP/JPY
The pair formed a very interesting channel within the downtrend that started at 241.00 and is now floating around 233.00. All indicators show that the downtrend still has plenty of steam in it which gives forex traders a great opportunity to jump into the trend before it reaches a stronger support. Target price seems to be around 230.00.
Market Trend
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
|---|---|---|---|---|---|---|
| Daily Trend |  |
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| Weekly Trend | |
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| Resistance | 1.3222 | 1.9770 | 121.36 | 1.2538 | 0.7952 | 0.6850 |
| 1.3200 | 1.9621 | 120.67 | 1.2505 | 0.7930 | 0.6804 | |
| 1.3162 | 1.9560 | 119.88 | 1.2470 | 0.7910 | 0.6768 | |
| Support | 1.3095 | 1.9462 | 119.00 | 1.2315 | 0.7812 | 0.6676 |
| 1.3041 | 1.9394 | 118.90 | 1.2295 | 0.7793 | 0.6600 | |
| 1.3023 | 1.9283 | 118.28 | 1.2257 | 0.7739 | 0.6576 |
Indicators
| Date | Time GMT | $€£¥ | Event | Period | Prev. | Forecast | Imp |
|---|---|---|---|---|---|---|---|
| 19/02/2007 | 13:30 | CAD | Wholesale Inventories | Dec | 0.9% | 0.3% |  |
| 19/02/2007 | 13:30 | CAD | Wholesale Sales | Dec | 0.1% | 0.6% | |
| 19/02/2007 | US | Presiden's Day Holiday | |