News and Events:

Due to the US holiday, trading has been subdued. Gold continues to push higher, while equity markets struggle. The Usd gained broadly and was helped by a thin liquid environment, which caused EURUSD stops to be triggered in the Asian session. The break of 1.2707 gives scope to test December's 1.2550 lows. We still believe the risk aversion trade is well entrenched and should benefit safe-haven currencies, such as USD and JPY specifically. Gold continues to gain ground alongside US inflation expectations, which suggests that investors are becoming increasingly concerned with the Fed unorthodox monetary policy. In addition, recent comments from the Russian Central Bank, on its goal to increase their physical gold reserves, should keep prices well supported today.

In Australia, the RBA released the February Board Meeting Minutes, when the central bank opted to slash 100bp from their cash rate to 3.25%. The minutes noted that marked deterioration in global economic conditions and downgrades to the domestic growth and inflation outlook caused the central bank to take a more aggressive stance. One area of note was the bank's assessment that growth remains considerably more robust domestically, than in other developed countries. The AUDUSD fell through the 0.6432 horizontal support and continues to have a bearish tone.

US President Obama first fiscal stimulus (we believe more is to come) is expected to be signed into law by the President today. However, this plan is nowhere near as inspiring as the headlines might suggest.

In the European session, markets will be watching German ZEW investor sentiment.


Today Key Issues:

  • 09:30 GBP CPI, % m/m Jan -1.1 (2.7 y/y) exp , prior -0.4 (3.1 y/y)
  • 09:30 GBP CPI ex food, energy, alcohol & tobacco, % y/y Jan 0.9 exp, prior 1.2
  • 09:30 GBP DCLG house prices, % y/y nsa Dec prior -8.6
  • 10:00 EUR ZEW economic expectations index Feb -28.0 exp , prior -31.0
  • 10:00 EUR Trade balance, €bn (sa) Dec -7.0 exp, prior -4.9
  • 13:30 USD Empire manufacturing, index Feb -23.00 exp, prior -22.20
  • 14:00 USD Net foreign security purchases (TICs), $bn Dec prior -21.7
  • 18:00 USD NAHB housing market index Feb 8 exp, prior 8
  • 18:30 GBP BoE MPC member Tim Besley speaks at the London School of Economics

The Risk Today:

EurUsd Strong support at 1.2707 (Feb 2nd low) is broken as continued gloom and doom surrounds the Euro. We see strong momentum towards 1.2553 (Dec 4th low) with an eye on 1.2651 and 1.2707 as retracement levels (23.60% and 50.00% on Fibonacci retracement).

GbpUsd Continued pressure on 1.4142 as Sterling fails to counter dollar strength - level will probably be tested several times before giving way to 1.4053 with 1.3506 as a mid-term target. On the upside 1.4311 (38.20% on Fibonacci retracement) then 1.4499.

UsdJpy Yen strength has subsided somewhat, 92.44 stands as initial resistance, however we see 92.78 capping recent move - a break at this level would pave the way for a renewed upward bias towards 94.65 (Jan 6 high). Intraday support stands at 90.76 - long-term support remains at 87.12.

UsdChf Swissy's moves are more subdued than other majors, strong resistance at 1.1784 (Jan 10th high that we have tested again today) - a break of this level allows us to aim for 1.2308 in the long-run. Intraday support stands at 1.1591 with mid-term support at 1.1508.

1.3075 S1.4600 S95.00 S1.2308 M
1.2826 S1.4499 T94.65 T1.1830 K
1.2707 M1.4311 P92.44 S1.1784 S
1.2643  1.4279  92.15 T1.1733  
1.2553 M1.4142 M91.63 M1.1591 T
1.2385 K1.4053 M91.30 K1.1508 M
1.2330 S1.3836 S87.12 M1.1400 S
S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot


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