Overall, the currency market moved very strongly in the Asian session, but lost steam after the London open. Most of the gains seen during the Asian trading hours came after the RBA decided to keep the overnight rate steady, causing the aussie to strengthen at a strong rate. Interestingly enough, in the last few trading days, the European session has produced little in the way of trading opportunities. Ahead, the market is likely to remain volatile during the U.S. session, especially during the opening hours, when the Canadian interest rate decision is announced.
The Euro (Eur/Usd) managed to gain almost 100 pips in the Asian session, and break free from the tight range seen just one day earlier. However, in the European session, the pair struggled, failing to break above TheLFB R2 (1.2665). The daily chart shows that the euro continues to trade below all the important simple moving averages.
The Pound (Gbp/Usd) rose approximately 100 pips tonight, but overall the pair traded on weak momentum. The pound is heading towards the 1.4150 resistance area, as the market seems to be selling the dollar in the European session. On Thursday, the BoE is expected to reduce the overnight interest rate.
In February, the U.K. Construction PMI fell to an all-time low, 27.8. This follows a sharp rise seen last month, when the index unexpectedly rose 5.2 points. Almost every sub-index of the release points to a severe slowdown, as the British construction market has tumbled for more than a year. At this point, the housing market is experiencing the lack of credit and liquidity in the market, despite the huge rate cuts made by the BoE
The Aussie (Aud/Usd) was the clear winner of the overnight session. The pair rallied both in the Asian and European sessions after the RBA decided to hold the interest rate steady at 3.25%, even though the market expected a 25 basis points rate cut. Until now, the aussie has risen 160 pips, paring the declines from the last two days of trading.
Retail sales in Australia have increased by 0.2 percent in January which is higher than analysts’ forecasts of a -0.5 percent decrease but is sharply lower than Decembers 3.8 percent. In seasonally adjusted terms, food retailing, clothing and soft good retailing, cafes and restaurants had an increase in January while department stores, and household good retailing declined. The current account deficit fell 32 percent for the December quarter of 2008. This is the third straight quarter that the deficit has narrowed
In a surprise move the Reserve Bank of Australia has decided to keep the current cash rate at 3.00 percent effective 3 March 2009. RBA Governor Stevens has stated that the world economy appears to still be very weak even though the credit markets have improved since last November. Demand has not weakened as much as other countries and the economy remain strong while inflation is likely to decline over time.
The Cad (Usd/Cad) fell 100 pips since the new trading day started. Tonight’s decline follows two days of strong gains, in which the cad broke above every major resistance area that was thrown in its way. Later today, the market expects the BoC to reduce its monetary policy stance by 50 basis points.
The Swissy (Usd/Chf) is the only pair that has not been able to produce a decent trend. For more than a month, the swissy has traded in 300-pip range, lacking any direction or volume. Tonight, the swissy has fallen 60 pips.
The Swiss economy contracted less than expected in the fourth quarter. From Q3 to Q4 2008 the economy shrank 0.3%, while compared with the fourth quarter of 2007 the economy contracted 0.6%. The data for the third quarter was revised lower to -0.1%, indicating that the economy contracted for two consecutive quarters in Q4 2008.
The Yen (Usd/Yen) rose almost 100 pips in the overnight session. The pair opened near the low of the last day of trading, and moved higher since then. During the European session, the yen broke above TheLFB R1 (97.70) and at the same time moved above the high reached on Monday.