Last week's NFP boosted the USD.. Will the JPY rally continue?
Economical News
USD
Last week ended with a small surprise as the Nonfarm Payroll came in at 97K. Although being a relatively low number, the expectations were much lower, creating a positive rally for the USD. The relatively strong number was supported by positive average hourly earnings which increased by a more than expected 0.4%. The EUR/USD ended the week 150 pips lower at 1.3090. This Nonfarm Payrolls proved once again that the actual numbers are not those that matter, but the expectations are far more important in determining the final outcome of price changes. It looks as if this time the low ADP had an important role in setting the low expectations for the following NFP, as its importance, and correlation with the NFP are commonly argued in many economic circles.
Today, there is no news expected to come from the US, as the market will be waiting for tomorrow, when the US Retail Sales is expected to come in stronger than last month's 0.0%, at 0.4%. Later on this week the US Current Account is expect to be released and the Trade Balance is widely expected to narrow a bit, which together with a strong Retail Sales might spur further positive energy to the Greenback.
As a whole, no big surprises are expected to shake the US markets this week, and it might be a good week to range trade.
EUR
Last week was an important one for the Euro-Zone monetary policy, as it saw the hike in the European interest rate to 3.75, topped by the Bank of England's decision to keep the rates unchanged at 5.25%. The uncertainty regarding the ECB's future policy caused most of the European currencies to depreciate across the board, and the culmination came in the form of a stronger then expected NFP in the US market, that sent the EUR and the GBP further down.
As for today the biggest news expected to come from the European market is the GBP Producer Price Index for the month of January, which is expected to come in a bit lower than last's month's 0.3%, at 0.2%. If the PPI will come in line with expectations, no major volatility is expected, although traders will scrutinize the GBP around the publication time (9:30 GMT).
JPY
The behavior of the JPY last week persuaded many traders to jump back into the carry trades, after JPY weakness didn't seem to be stopping. We saw big focus on the Japanese market, last week as it delivered the most consistent and stable trend, that could be a strong signal the we will continue to see the JPY going in the direction we were so used to seeing it - Down!.
Looking ahead, we are expecting second quarter GDP, current account, Domestic CGPI, consumer confidence, industrial production and leading indicators this week. The Japanese economic calendar is busy which suggests that the market may continue to focus on the Yen.
Technical Analysis
EUR/USD
The pair closed last week's session at 1.3090 and is now testing 1.3120. It looks as if last week's range trading will continue this week, as the dailies and hourlies are at neutral levels. The recommended range would be 1.3060/1.3200 with strong attention on the unwinding of the hourlies as an entry and exit signals.
GBP/USD
It was a choppy session for the pair last week, with a clear bearish movement. The pair started this morning with a small increase, as the hourlies are touching overbought territories. The daily charts are mildly bullish, indicating that buying on dips might be preferable today.
USD/JPY
The pair is testing the 118.40 levels at the end of the Asian session. The daily charts are extremely bullish with plenty of room to extend, as the hourlies are reaching overbought levels. The ongoing direction for the pair continues to up, with a local target price of 119.50.
USD/CHF
After it soared over 200 pips last week, the pair is consolidating around 1.2340. The daily studies are very bullish, as the hourlies are approaching overbought levels. The overall notion for the pair is up, so a preferable strategy might be buying on dips.
Wild Card
GBP/JPY
A very stable and consistent uptrend is forming on the 1 hour charts, giving forex traders the opportunity to jump in to the trend when it still has plenty of steam in it. The current target price is 231.00, which means that the profit potential might be more than 150 pips.
Market Trend
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
|---|---|---|---|---|---|---|
| Daily Trend |  |
|
|
|
|
 |
| Weekly Trend | |
|
|
|
|
|
| Resistance | 1.3250 | 1.9563 | 120.12 | 1.2447 | 0.7946 | 0.6960 |
| 1.3217 | 1.9470 | 119.30 | 1.2397 | 0.7923 | 0.6902 | |
| 1.3192 | 1.9415 | 118.98 | 1.2358 | 0.7880 | 0.6830 | |
| Support | 1.3100 | 1.9283 | 117.23 | 1.2280 | 0.7778 | 0.6737 |
| 1.3086 | 1.9205 | 116.80 | 1.2194 | 0.7705 | 0.6694 | |
| 1.3033 | 1.9130 | 115.98 | 1.2098 | 0.7678 | 0.6649 |
Indicators
| Date | Time GMT | $€£¥ | Event | Period | Prev. | Forecast | Imp |
|---|---|---|---|---|---|---|---|
| 12/03/2007 | 09:30 | GBP | Producer Price Index Output not seasonally adjusted MoM | JAN | 0.3% | 0.2% |  |
| 12/03/2007 | 09:30 | GBP | Producer Price Index Output not seasonally adjusted YoY | JAN | 2.1% | 2.1% | |