Overall, the currency market moved sideways in the European session, despite strong selling seen in the equity market, which denotes investors’ aversion to risk. Most of the pairs are holding barely above important swing points, and only when these levels fail, will the majors trend properly again.
The Euro (Eur/Usd) fell sharply in the first minutes of the Asian session, but traded in a close range, below TheLFB S1 (1.2595), after things settled. The daily chart shows the euro is barely holding above the 1.2500 area, where it also bottomed two weeks ago and in early December. However, if it breaks lower, the euro will touch the lowest value since mid-November.
The Euro-area Flash CPI rose in February for the first time since June 2008. Until now, the declines in the CPI read were led by the crude oil sub-index, but the Flash estimate does not provide a detailed breakdown of the CPI’s components. The PMI release shows the euro-area manufacturing side of the economy has contracted for nine consecutive months. The Euro-zone PMI survey continues to establish record lows, pointing out that the economic contraction may be stronger and even more prolonged than previously thought.
The Pound (Gbp/Usd) struggled to break and hold below the 1.4200 support area in the overnight session. If the pair manages to move below this level, the cable will target the 1.4150 support area, which has held the pair for almost one month despite numerous attempts to break lower.
Net lending to individuals fell again in January. The number came in at only £1.1B, much lower than analysts’ expectations. At the same time, the report showed that the number of loans approved for home purchase remain steady in January, at 31K. The U.K. Manufacturing PMI continued to disappoint investors in February, posting the second weakest read in its recent history.
The Aussie (Aud/Usd) traded in a 90-pip range during the overnight session, but was unable to break decisively in either direction. The pair is currently trading near a very important swing area that has held the pair for a few weeks. Among the major currencies, Australia is the only one that has a somewhat positive projection in 2009 even though the outlook lies to the downside.
The manufacturing sector in Australia has fallen to 31.7 in February from the previous reading of 36.6 in January. This is the ninth consecutive monthly decline for manufacturing activity in Australia, although the rate of decline has eased slightly from the low seen in November of 2008.
The inflation estimate for Australia, released this evening by TD Securities, increased by 0.7 percent month over month for February. This report shows that inflation pressures have somewhat stabilized as the economy attempts to buffer itself from the global recession which has diminished exports and consumer confidence wanes.
The Cad (Usd/Cad) rose 50 pips tonight, following the strong gains seen on Friday. The pair touched the highest value since December overnight, as the Canadian dollar continues to lose ground. On the upside, the next major resistance area is in the 1.3000 area, nearly 200 pips above today’s open.
The Swissy (Usd/Chf) traded in a 40-pip range in the Asian session, between the opening price and the Friday’s high. In the European session, the swissy managed to break higher, but soon hit TheLFB R1 (1.1770), where it topped. Lately, the swissy has traded in a defined range, unable to develop a proper trend.
The Purchasing Managers Index shows the industrial sector contracted in Switzerland for the sixth consecutive month. The PMI number was released at 32.6, versus analyst’s estimates of 34.8. The Swiss PMI confirms that the economy is taking a similar path as the Euro-area and the U.S. economies, which are in recession. The index sits at multi-year lows, showing that inflationary pressures are almost zero.
The Yen (Usd/Yen) started the Asian session very strong, and continued into the European trading hours. However, the yen lacked any direction after the London open, and traded side-ways to the neutral pivot point. Today is the second consecutive day in which the pair has declined, after it posting strong gains through most of last week.
The Japanese cash earnings decreased in January by 1.3 percent, this was after a 1.2 percent drop seen during December. Overtime hours fell by 40 percent while overtime pay dropped 14.8 percent. Overtime pay fell at its fastest pace ever as exports declined which prompted employers such as Toyota and Sony to cut hours and halt factory