Overall: The market moved very little in the overnight session. The majors made some feeble attempts to break the support or resistance areas in the Asian session, but failed to pull off the moves due to the lack of momentum. The only positive thing that happened tonight was that the main pairs started to regain correlation, something that has been missing in the last few days. The dollar began to weaken against the higher-yielders (and gained on the yen) after stocks rose on the news that pending sales of existing single-family homes, condos and co-ops increased 6.3% on a seasonally adjusted annual basis in December, the first increase in the number of signed contracts since last August.
The Euro (Eur/Usd) tested TheLFB R1 (1.2900) during the Asian session and at the same time the high reached in the last day of trading. However, the pair started to move lower soon after, shedding almost every gain made in the Asian session. After the London open, the euro started again to move higher, but the moves were relatively strained. The pair rose in N.Y as stocks and crude gained on the day, retracing to 50% of the downswing between Jan 28 and Feb 02.
German retail sales continued to tumble in December, as the economy slows. Retail sales have fallen by 0.2% compared to the expected 0.5%. From one year earlier, retail sales are down in Germany by 0.3%. The Euro-area PPI shows that the pace of inflation is starting to slow at a strong pace. Producer prices dropped a 1.3% in December, following a record drop just one month before, of 2.0% (revised)
The Pound (Gbp/Usd) wasted the Asian session and the early European trading hours struggling to break above the neutral pivot point (1.4250). The pair fell yesterday nearly 400 pips, but recovered half of the ground lost during the U.S. session. The pair resumed its recent assent as risk-acceptance came into the market, reaching the 61.8% retracement of the Jan 16 to Jan 23 decline.
The construction PMI rose sharply in January, up to 34.5, despite analyst expectations for a very poor read. Just one month ago, in December, the index hit a record low. The sharp rise may have been influenced by the BoE's huge rate cuts, and the U.K. government's decision to support the mortgage market throughout its newly nationalized banks
The Aussie (Aud/Usd) rose tonight for the first time in the last four days after the RBA cut the overnight lending rate by one full percentage point. During the Asian session, the pair advanced 120 pips, from which 60 pips came during the interest rate announcement. Obviously, aggressive moves by the Central Bank are a positive for a currency in this environment and the aussie was supported further in N.Y. as stocks gained, retracing 23.6% of the downswing between Jan 07 to Feb 02.
The Reserve Bank of Australia has lowered its interest rate a full 100 basis points to 3.25 percent. Governor Glenn Stevens has lowered the rate to a low not seen during the last two decades. By doing this, Governor Stevens and the RBA aim to restore consumer and business confidence which has been battered by the global financial crisis and hopes that this cut well help spur demand and keep the country from slipping into a period of negative growth.
The Cad (Usd/Cad) tested the high of the previous day of trading, during the Asian session, but lacked the momentum to break higher. Lately, the cad has been affected by the declines seen in the crude oil market, pulling the Canadian dollar lower. That trend was maintained (in reverse) in N.Y. as crude rose, and the pair fell to the 50% retracement between the low made on Jan 29 to the peak made today.
The Swissy (Usd/Chf) struggled to take out the neutral pivot point (1.1630) in the overnight session, but failed to pull the move. In addition, the pair trades above all the important moving averages and is near an important resistance area, which has held the pair in the last few weeks. The pair declined in N.Y. for the first time in a week as stocks moved higher on the day.
The Swiss trade balance surplus tumbled in December, as the foreign demand slowed. Compared with the estimated number, the trade balance was released much lower, 0.22B versus 1.74B. For November, the report was revised slightly higher, to 2.25B
The Yen (Usd/Yen) traded in a 60-pip range overnight, between the neutral pivot point (89.35) and TheLFB R1 (89.95). The pair has struggled to break above the 90.00 area, and in the same area above the 20-day moving average for a few days. The pair was higher in N.Y. as stocks rose, finding resistance at 89.33.
The Japanese monetary base came in with a reading of 3.9 percent year over year in January. This is sharply higher than December's reading of 1.8 percent, as well as being above analysts' expectations. Banknote circulation in January was up 0.4 percent.