More disappointing data overnight out of the Eurozone with GDP data for the region coming in below expectation. Talk heading into the G7 that FX will take on a more central focus. Euro needs to close above 1.2945 to keep any chances for a recovery rally intact. CTAs on the bid in GBP/JPY. Looking to buy Kiwi/Yen.
FUNDYS More disappointing data overnight out of the Eurozone with GDP data for the region coming in below expectation at -1.5% after analysts had been looking for a -1.3% print. German and French GDP also were weaker while Swiss PPI came in softer down 0.8%. The increased risk appetite into Thursday's close has carried over into Friday with the markets buying back into carry . Global equities are also higher on the day with some optimism being generated from the potential passage of the Obama stimulus , while others have begun to find comfort with the Geithner bank rescue plan as more details are disclosed. Some analysts however have attributed the recent price action to broad based profit taking ahead of the G7 rather than any real boost of confidence or appetite for risk. There has been continued talk heading into the G7 that FX will take on a more central focus with rumors of specific references to the Yen and Sterling . While talk of excessive Yen appreciation has become customary at this point, talk of the recent Sterling depreciation is certainly more unique. There has been increased pressure out of the Eurozone in particular for the BoE to attempt to take on a more active role in their currency. UK Chancellor Darling will apparently come under attack from various Eurozone officials at the upcoming G7 dinner this evening. Nevertheless, more often than not, any talk ahead of the G7 meetings relating to currency movements usually proves to be a let down, and we have already seen more prominent officials including Trichet and Nakagawa downplay the topic of FX on the agenda. In Asia, there has been more talk of a potential rate cut out from China , while in Australia , the Senate has final passed the A$42B stimulus package. Early Euro gains have been offset following the weaker GDP, and EUR/GBP has once again come back under pressure. On the commodity front, oil has come back a bit up just over 1.00% while gold trades lower down 0.85%. Looking ahead to the North American session, Canada motor vehicle sales (-15.0% expected) due at 13:30GMT, while Reuters/University of Michigan confidence (60.6 expected) is at 15:00GMT.
TECHS EUR/USD continues to be very well supported on dips to the 1.2700 area but will need to break and close back above 1.2945 (Wed/Thurs high/Previous weekly close) to keep any chances for a recovery rally intact. Back under 1.2700 will negate and likely open a resumption of the broader downtrend. USD/JPY price action has been constructive and the pair looks to be attempting to put in a fresh higher low by 89.70 (11Feb low) to be confirmed on a break back above 92.45. Look for a direct retest of 92.45 over the coming session with the market now trading back into the Ichimoku cloud. GBP/USD is looking to put in a bullish reversal day following 3 consecutive down-days off of Monday's 1.4990 highs. A higher low could now be in place at 1.4135 (Thursday's low) and this will be the key level to watch below. The 50-Day SMA is just ahead at 1.4635 and there is very little in the way of any resistance to 1.4990 once 1.4635 is broken. USD/CHF continues to chop around in sideways fashion and while the overall structure remains bullish, no real short-term directional bias can be established until a break above 1.1785 or back below 1.1500.
FLOWS German and French bank on the offer in EUR/GBP . Commercial offers taken out on the rally in USD/JPY on Japanese tech and pension fund related buying; exporter offers above 92.00. CTAs on the bid in GBP/JPY . Gold seeing some fund related end of week profit taking.
TRADE OF THE DAY - NZD/JPY: Friday's break back above 48.00 keeps alive the hopes for a recovery with the cross now potentially looking to put in a fresh higher low at 46.45 (12Feb low) above the multi-year lows set in early February by 44.25. While daily studies are now in neutral territory, the weekly chart still has only just turned up from oversold and shows plenty of room for additional corrective upside before consideration of bear trend resumption. Look for gains now to accelerate back towards the weekly high at 49.90, with a break above the latter to confirm a higher low by 46.45 and open the next upside extension towards the 53.00-55.00 area. Only back under 46.45 negates. Strategy: BUY@ 48.00 FOR A 50.55 OBJECTIVE, STOP @46.25.