Forex News and Events:
Yet another day of Asian equity market gains have ensured the European session has started with a positive tone; and gold has once again made new all-time highs above $1226 as the USD has been put under renewed pressure from virtually all currencies except the JPY. The morning rally has pushed EURUSD to test 1.5130 resistance, and after negligible effect from the Eurozone Services and Composite PMI data, the mantle will likely fall to this afternoon’s ECB policy meeting to provide the catalyst for a further climb to test 1.5150 levels. Really there is only one factor that hangs in the balance at this meeting, and that will be the possible discontinuation of the ECB’s 12-month fixed rate-tenders. There is not expected to be any alteration in the refinancing rate, and indeed the recent rhetoric from US officials that they are not concerned by USD depreciation will likely negate the effect of any repetition of the “strong USD policy” from European officials. For now, the issue of JPY strength is taking a back seat after USDJPY has recovered back above 87.15 pivot levels to touch highs of 87.92. However the tension surrounding the recent appreciation of the currency is still simmering amongst Japanese policymakers, with the leader of the Japanese government’s opposition accusing the Prime Minister of exacerbating the currency surge with confusing comments that “prompted misconceptions” in the market. With the powerful downtrend in USDJPY still intact, it is unlikely this matter is going to stay on the sidelines for long, and recent meetings between Japanese and US officials has certainly ignited speculation that Japan is trying to lay the foundations for coordinated currency intervention. In other headlines from Asia, it seems that China is more resolute than ever to deflect pressure for the CNY to appreciate. Commerce Minister Chen Deming was on the wires overnight to say that the world’s attentions would be better focused on the damaging lack of stability in the USD, rather than the value of the CNY. He claimed that an unstable CNY would have a very bad effect on the global economy; echoing previous Chinese rhetoric that by keeping the CNY stable they have helped stimulate the recovery. As we have frequently observed whenever CNY appreciation has been debated in the press, it is almost never supported by China itself, and this is yet another setback for US officials after the much-hyped Obama visit last month.
Today's Key Issues (time in GMT):
12:45 EUR ECB rate announcement, % Dec exp: 1.0 prev: 1.0
13:30 USD Productivity, % q/q saar Q3 f exp: 8.5 prev: 9.5
13:30 USD Unit labour costs, % q/q saar Q3 f exp: -4.1 prev: -5.2
15:00 USD ISM non-manufacturing index Nov exp: 51.5 prev: 50.6
The Risk Today:
EurUsd The EURUSD found good bids after dropping yesterday to 1.5030 – 1.5040 support zone. Upside remains favored as major up trend line remained intact, and momentum indicator “stochastic” is still showing further bullish movement to come; however we need a break above 1.5143 to sustain the bullish momentum, and only a break of the 1.4970/20 area could lead to a reversal in the short term.
GbpUsd GBPUSD continued its bullish momentum yesterday and broke above the 2 week down trendline at 1.6630. Key resistance is at 1.6744 (25th Nov high), a break above here would confirm the bullish movement; but be aware of the potential rising wedge that has been forming on the 4-hourly chart since bottoming out at 1.6270 last week.
UsdJpy USDJPY had bullish momentum yesterday, and broke through key resistance at 87.46 (26th Nov high); the bullish momentum has resumed today but stopped just short of 88.00 and the pair will face an important test as it approaches the one month down trendline coming in around 88.40.
UsdChf USDCHF had bullish momentum yesterday, topping at 1.0025. This correction has shaken out the positive bias of the stochastic indicator, and today the bearish momentum looks to be sustained. We would therefore look for a test of 0.9916 (26th Nov low). A break below 0.9916 could pull the pair to 0.9880 and target 0.9635 (Mar 2008 low)
Resistance and Support
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot|