Euro under pressure on continuing euro zone debt issues

  • The euro edged higher versus the dollar at the start of the new week supported by a rise in risk appetite. Tensions in Egypt appear to ease as Egypt's President Mubarak has stepped down while Japan's economy in the fourth quarter was better than the market anticipated. Demand for riskier assets is high and the euro managed to rise to 1.3555 versus the dollar recovering from a three week low at 1.3496. But the euro's rebound appears shaky while the continuing debt issues in the euro zone put the single currency under pressure. Investors now focus on Spain's and Italy's bond auctions after last week ECB intervened in the bond market buying Portugal's debt to reverse the yields from record high levels.
  • Against the Japanese Yen, the dollar broke above the 83 level and hit a five month high at 83.66 supported by positive economic data in the US as well as higher US yields. Today the dollar surrendered some of its gains as speculators talk of Japanese firms buying the yen. The pair fell to 83.08 and it was last trading at 83.11.
  • The Australian dollar edged higher on Monday after data showed that China's imports hit a record high in January despite the massive floods in Australia. Heightened risk sentiment in the market combined with positive housing data helped the Aussie jump as high as 1.0063 versus the dollar from 0.9980. Eyes turn to China's Consumer Price Index for January which due tomorrow. Speculators are expecting inflation in China to reveal a lower than expected figure which can push the Aussie further up. Aussie's neighbor, the New Zealand dollar plummeted on Monday on surprisingly poor retail sales data. The lower than expected retail sales data added strength on the view that interest rates in New Zealand will stay on hold for an extended period of time. The Kiwi fell as low as 0.7552 against the dollar from 0.7610 traded before the data was released. Later, the pair recovered some of its losses and was last traded at 0.7587.
  • Gold ticked higher supported by a softer dollar and speculation that China's inflation will be lower than expected. Gold prices rose to 1360.58 dollars an ounce from 1353.88. 

Currency to watch out for: EURUSD & USDJPY

  • § The EURUSD pivot point is at 1.3590 with a preference to enter into Short positions at 1.3580
  • § The USDJPY pivot point is at 83.50 with a preference to enter Short positions at 83.45              

Today's calendar and market movers:

  • § Europe Industrial Production in December is forecasted to fall 0.2% MoM
  • § Europe Industrial Production in December is forecasted to gain 8% YoY

Equity Markets:

US equities were positive on Friday with the S&P500 trading up 0.55% and the DJIA trading up 0.36%. The European bourses are also positive with the FTSE trading up 0.71%, the DAX trading up 0.42% and the CAC up 0.15%. The NIKKEI and the HSI at the time of writing are trading up 1.13% and up 1.07% respectively.

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