Dollar extends recent decline in early US session after mixed housing data. Housing starts dropped more than expected by -4.3% to a 529k annualized rate, the worst figures since October 2009 and below expectation of 550k. Though, building permits jumped sharply to 635k annualized. Euro continue to extend recent rebound against the greenback with EUR/USD back trading above 1.35 level. The common currency is also strong against Swissy as Swiss Economy Minister Johann Schneider-Amman and Swiss President Micheline Calmy-Rey are scheduled to hold a press conference later today on the Franc.
Axel Weber, who's widely tipped as successor of Trichet as President of ECB as he steps down in October, said he expects inflation to remain below 2% target in the medium term and softened his tone of risks to inflation. ECB council member Nowotny emphasized that the bank saw the current interest rates as adequate and there is no need for a change in the foreseeable future. Market reactions to Trichet's inflation comment was described as one-sided by Nowotny. Earlier this week, Orphanides said that Trichet's statement was was not overly hawkish and there is sometimes an overreaction to the underlying message.
UK claimant counts dropped more than expected by -4.1k in December, hitting the lowest level in 21 months, at 1.457m. ILO unemployment rate was unchanged at 7.9% in the three months through November. The data suggests that recovery in the labor market gained some traction in Q4. However, one must note that it's before the government's spending cuts take effect. Sterling is firm against dollar but loses some steam against Euro today.
EUR/USD Mid-Day Outlook
Daily Pivots: (S1) 1.3271; (P) 1.3369 (R1) 1.3484; More.
EUR/USD rises further to as high as 1.3537 in early US session and the break of 1.3496 resistance indicates that fall from 1.4281 has completed at 1.2873 already. Note that the corrective three wave structure of the fall, with 1.2643 support intact, will indicate that rebound from 1.1875 is possibly not over yet Intraday bias is on the upside for 1.3785 resistance first and then a test on 1.4281. On the downside, break of 1.3245 support is needed to indicate completion of rebound from 1.2873. Otherwise, we'll stay cautiously bullish.
In the bigger picture, main question remains on whether medium term correction from 1.6039 has finished with three waves down to 1.1875. Current development, the shallower than expected fall from 1.4281, suggests that could indeed be a correction to rebound from 1.1875 only. And with 1.2643 support intact, rise from 1.1875 would possibly be in progress. Break of 1.3496 will target a test on 1.4281 resistance. On the downside, below 1.2873 will turn focus back to 1.2643 instead.
Economic Indicators Update
|23:30||AUD||Westpac Consumer Confidence Jan||-5.70%||--||0.20%|
|23:50||JPY||Tertiary Industry Index M/M Nov||0.60%||0.60%||0.50%||0.30%|
|09:00||EUR||Eurozone Current Account Nov||-11.2B||-7.3B||-9.8B||-9.6B|
|09:30||GBP||Claimant Count Rate Dec||4.50%||--||4.50%|
|09:30||GBP||Jobless Claims Change Dec||-4.1K||-1.4K||-1.2K||-3.2K|
|09:30||GBP||ILO Unemployment Rate (3M) Nov||7.90%||7.90%||7.90%|
|13:30||CAD||Manufacturing Shipments M/M Nov||-0.80%||1.10%||1.70%|
|13:30||USD||Building Permits Dec||0.64M||0.56M||0.54M|
|13:30||USD||Housing Starts Dec||0.53M||0.55M||0.56M|
|15:30||CAD||BoC Monetary Policy Report||--||--|