Overall: The currency market traded mixed in the overnight sessions, with the euro, swissy and the yen advancing against the dollar, while the rest of the major currencies declined for a second consecutive day. The market again lacked momentum and volume in the Asian session, but regained some during the European trading hours. S&P futures were up about 0.5% leading into the Wall Street open, but stocks traded between small gains and losses during the session. One important note; the 30-minute chart of S&P futures showed a clear support level on 819, and that helped the higher-yielders gain off the bottom of 30-minute channels on the corresponding charts.
In U.S. economic news, the trade deficit for December narrowed as the global economy slowed. In real terms, the deficit widened, meaning it will subtract from fourth quarter GDP calculations. Also, the weekly oil inventory report showed that while stockpiles gained more than expected, demand for gasoline improved for a second straight week.
The Euro (Eur/Usd) rose in the overnight session, gaining 70 pips. It seemed that the euro was following the same pattern of trading as yesterday when together with the swissy, were the only major pairs to advance against the dollar. The pair rose off the bottom of a 30 minute channel in N.Y. as the S&P futures found support on 819, the low from Tuesday.
The German CPI fell by 0.5% in January, in-line with the market’s expectations. Last month, in December, the German CPI rose for the first time in the last 5 month. Year-over-year inflation in Germany reached 0.9%, dragged lower by the huge declines seen in the energy market.
The Pound (Gbp/Usd) dropped another 140 pips in the overnight sessions, as the market prepared itself for the BoE Inflation Report. The pound tumbled in the last two days of trading nearly 500 pips, breaking below the 50-day simple moving average and under a very important trend-line that connected the peaks from November to January although it held support at a longer trend line from Sep.19 to Jan. 06. As with the euro, the pair garnered some interest once S&P futures found support at Tuesday's low.
The unemployment rate increased again in the U.K. in the latest three months to December 2008, to the highest rate seen in the last decade. The released rate of 6.3% is in-line with market expectations. The annual rate of growth in average earnings excluding bonuses was 3.6% in the three months to December 2008, unchanged from the three months to November. The number of people seeking unemployment increased again in January, to the highest value in the last 10 years. The report shows there were 1.23 million persons on the claimant count in January, and up by 73,800 from one month earlier
The Aussie (Aud/Usd) traded without a clear direction in the overnight session. The pair had some small swings around the Asian open price, but never succeeded to break anywhere. Once in N.Y., the pair rose and fell with equity markets, rising with the euro and pound against the dollar once support on the S&P futures was re-established on 819, the low from Tuesday.
Home loans in Australia grew twice as much as analysts’ estimates of 3.6 percent to an astounding 6.4 percent in December. In trend terms, the total value of dwelling finance commitments increased 0.8%. Owner occupied housing commitments increased 1.7%, while investment housing commitments decreased 1.3%. The consumer sentiment indicator for Australia fell to -4.6 percent from last month’s -2.2 percent reading. The sentiment index came in at 85.8 points in February and this is the twelfth month that the index has held below 100.
The Cad (Usd/Cad) extended the gains seen one day earlier, and added another 50 pips. Most of the gains came shortly after the London Open, while earlier, during the Asian trading hours, the cad traded mostly flat. The cad is getting close to the 1.2500 resistance level, which has held the pair for about three weeks. The level was surpassed briefly in N.Y. to 1.2530 as crude declined nearly 3.6% by 15:00 EST.
The Swissy (Usd/Chf) advanced 60 pips in the early part of the Asian session, but shed every pip gained soon after. During the European session, the pair fell another 50 pips, and tested the low of the previous day of trading, very close to the area formed by the 20 and the 100-day moving averages. The pair declined in N.Y. once the S&P futures found the support on 819, with 1.1695 established as clear resistance on the 30-minute chart.
The Yen (Usd/Yen) tested the 20-day simple moving average after declining 45 pips overnight. The pair moved lower and broke below the previous days low even though the S&P futures advanced a little overnight. The pair declined throughout most of the N.Y. session even though it did squeeze a few pips out of the small equity rally. The pair has established trend line support from the low of the day to 90.25.