Overall, the major currency pairs traded mixed in the European session. The euro and the pound traded mostly flat, the aussie and the cad tumbled against the greenback, while the swissy and the yen found the strength to gain some pips. This comes after the dollar strengthened against every major currency during the Asian session.
The Euro (Eur/Usd) fell nearly 200 pips in the Asian session and in the early part of the European session, but could not break below the 1.2600 area. The euro managed to break, for the first time since December, below the 1.2750 support area, something that will make some traders switch camp from bulls to bears.
The Euro-area adjusted trade balance was released at -0.3B in December, much better than expected. In December 2008 compared with November 2008, seasonally adjusted exports fell by 0.9% and imports by 3.9%. The Zew Economic Sentiment indicator for Germany improved again in February, for the fourth consecutive month, reaching -5.8 points. The index gained 19.40 points in February, from one month earlier. Economic expectations for the euro zone increased in February by 22.1 points. The respective indicator now stands at -8.7 points
The Pound (Gbp/Usd) is trading near the 1.4050 area, where it had bottomed in the last few days. The pair fell 60 pips shortly after the London open, down to the support level, but could not move any lower from then on.
The U.K. Consumer Price Index moved slightly lower in January, to 3.0%, from 3.1% one month earlier. Even though the CPI declined at a record pace last month, this month the inflation gauge barely moved. In addition, the Core CPI, which excludes volatile items, actually rose to 1.3% from 1.1% last month.
The Aussie (Aud/Usd) initially rose 30 pips in the first minutes after the Asian session opened, but bounced off the 20-day simple moving average and started to move lower. Until now, the aussie has fallen 120 pips since the new trading day started, breaking below all the pivot points. The next important support area for the aussie will be in the 0.6350 area.
The following reasons were given for the RBA’s decision to lower interest rates by 100 basis points: the recent stimulus package is expected to encourage stronger demand in late 2009; interest rate reductions amount to very significant policy easing; the fiscal and monetary stimuli will take time in order to be effective.
The Cad (Usd/Cad) gained more than 150 pips in the overnight market, and is now trying to break above TheLFB R3 (1.2565). The pair managed to break and hold above the 1.2500 area for the first time in the last month, as the pair was pulled higher by the crude oil link.
The Swissy (Usd/Chf) rose nearly 180 pips from the low to the high of the Asian session, the biggest range of trade during that time period in recent history. However, shortly after the London open, the pair started to head lower, and shed some of the gains made earlier. Currently only the swissy and the yen strengthened in the European session against the dollar.
Swiss retail rose more than expected in December, compared with one year ago. Over the last few months, retail sales had risen strongly, but it seems this trend will reverse, in-line with the fatigue seen in the economy. Nominal retail sales rose 4.5% from one year earlier in December.
The Yen (Usd/Yen) rose 100 pips in the Asian session, trading near TheLFB R3 (92.6%), where it topped. In the European session, the yen started to move lower, shedding most of the gains made earlier. The yen’s moves during the European trading hours were inline with the S&P futures.
Japan’s tertiary industry activity index decreased 1.6 percent for December. This report comes in as expected by economists and is the second month in a row to have such a fall. This decrease is in large part due to the growing threat of a recession in Japan that has seen a lack. Japan, which is the worlds second largest economy has shrunk at the fastest pace since 1974.