Interest Rates On Tap - Japan Rate Decision Together With UK and US Central Banks Minutes.
Economical News
USD
Yesterday, there was no significant data and therefore we saw range trading which characterized yesterday's session.
Today, the CPI is expected. Recall, Energy prices pushed headline inflation higher last month, but will probably show a drop this month and might trigger a weaker than expected headline CPI figure.
The core CPI reading will be important for the markets and the Federal Reserve. An increase of 0.1% or lower would offer reassurance that inflationary pressure has peaked and would reinforce speculation that there will be scope for lower interest rates later in 2007. A figure above 0.3% would raise concerns over inflation.
The dollar should gain strongly if the core figure is above 0.3%.
In other news, it seems that trading conditions are likely to remain cautious ahead of the Federal Reserve interest rate minutes of the Jan 31st meeting (Wednesday,19:00GMT).
The US currency will find it difficult to secure further strong buying interest unless there is greater speculation that the Federal Reserve will be forced to increase interest later in 2007 and the USD will need very firm data to secure a strong advance from current levels.
EUR
Yesterday, the EUR strengthened against most of the majors when the ECB monthly Bulletin implied a future rate hike which may take place in March.
Today there is no major data due and therefore the currency is to be effected by the other majors.
After reaching a six week low yesterday, the GBP strengthened on the back of strong housing data. Coming after a run of relatively soft housing market data, the numbers reignited expectations for another BoE rate hike in the coming months, perhaps even as soon as March. Overall, the GBP traded with a range low of 1.9480 and a high of 1.9577 before closing at 1.9552. Looking ahead, the BoE MPC minutes is expected to be released today with trader's attention on any indication of future rate decisions.
JPY
The bank of Japan's policy board decided 8 to 1 to raise interest rates on preview of a moderate economic growth which will increase consumer prices
It appears the JPY has exhausted its upside potential after it weakened again yesterday. The JPY gained 77 pips against the USD in the previous day's session while uncertainty about the BOJ rate decision looms.
However the rate hike from 0.25 to 0.50 might establish new forces which may point on establishment of a new positive momentum that may lead for another strengthening of the JPY against the majors.
Toshiko Fukui the Gov. of the BOJ will speak later today and now all the attention is pointed to his press conference when everyone will try understanding if there is going to be a change in the BOJ policy regarding the Japanese economy, or even to find out if another rate hike is expected in the near future.
Technical Analysis
EUR/USD
The pair again tested resistance at 1.3176 (61.8% retracement of the 1.3268 to 1.2865 decline) which could open the way towards 1.3290. Initial support lies at 1.3095, last Friday's low, but only a break of the 1.2900 would jeopardize the potential for a move above 1.3176 and toward the 1.3298 early January high.
GBP/USD
The pair has been stuck between 1.9403 - 1.9750 for the past couple of weeks. Only a breakout from this range would mark the next key directional trend. A break of 1.9750 resistance (61.8% retracement of the 1.9917-1.9482 decline) is required to confirm the return of the bull trend.
USD/JPY
The pair recovered from recent 118.99 low. Further advance would open the door to 121 and even higher to 122.20. But an unsuccessful break of 119.90 would keep the Yen under pressure and may expose 119.23 (38.2% retracement of the 114.43-122.20 rally). Next support is the 118 pivot point. Waiting for direction; 119.90 is the key level.
USD/CHF
The pair rebounded yesterday from the 1.2312 low but remains under pressure below 1.2376, the former support. Further weakness may break 1.2309 (38.2% retracement of 1.1881-1.2574 advance). The next important support is 1.2260. Initial resistance is at 1.2412.
Wild Card
GBP/CHF
Forex The pair is trading 40 pips from its 9 years high. All indicators are bullish suggesting further gains with next resistance at 1.63. The trend started May 06, capped 800 pips forming a clear channel with large dips and tops. First resistance seen at 1.62
Market Trend
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
|---|---|---|---|---|---|---|
| Daily Trend |  |
 |
|
 |
|
|
| Weekly Trend | |
|
|
|
|
|
| Resistance | 1.3311 | 1.9770 | 121.36 | 1.2538 | 0.7952 | 0.6850 |
| 1.3248 | 1.9621 | 120.90 | 1.2505 | 0.7930 | 0.6807 | |
| 1.3207 | 1.9600 | 120.67 | 1.2470 | 0.7910 | 0.6780 | |
| Support | 1.3095 | 1.9530 | 119.00 | 1.2301 | 0.7812 | 0.6702 |
| 1.3045 | 1.9394 | 118.90 | 1.2274 | 0.7793 | 0.6658 | |
| 1.3005 | 1.9283 | 118.28 | 1.2227 | 0.7739 | 0.6603 |
Indicators
| Date | Time GMT | $€£¥ | Event | Period | Prev. | Forecast | Imp |
|---|---|---|---|---|---|---|---|
| 21/02/2007 | 9:30 | GBP | BOE Meeting Minutes |  | |||
| 21/02/2007 | 13:30 | US | CPI M/M | Jan' | 0.5% | 0.1% | |
| 21/02/2007 | 13:30 | US | CPI Y/Y | 2.5% | 1.9% | | |
| 21/02/2007 | 13:30 | US | Core CPI m/m | Jan' | 0.2% | 0.2% |  |
| 21/02/2007 | 15:00 | US | Leading Indicators | 0.3% | 0.2% | | |
| 21/02/2007 | 19:00 | US | FOMC Meeting Minutes | | |||
| 21/02/2007 | 23:50 | JP | Trade Balance (p) | 1.1T | 0.7T |  |