News and Events

Volatility was not shy yesterday as treasury secretary Geithner answered queries about the PBOC governor's statement that SDR's could be used to proxy the dollar as the global reserve currency. His initial claims that he agreed with the use of the IMF's international reserve asset literally shocked the markets, sending the EURUSD as high as 1.3649 (+180pips). After rectification that debasing the dollar wasn't an option confidence returned to the markets and the dollar rallied almost instantly, regaining similar levels than that witnessed before the move. The UK attempted a £1.75Bn auction of GILT (40 year) treasuries yesterday that only saw a 0.93 cover (1.00 being 100%) - the first failure since 1995 and the lowest reading in history. This poor showing underlines the incapacity of the UK government to rally support that would allow it to arm itself to act aggressively. Early lack of coordination has confidence at an all time low with considerable pressure on Gordon Brown to rally the sufficient funds to enact a plan worth deploying. To counteract this string of bad news German IFO numbers met targets. Business climate index was at 82.1 vs. consensus at 82.2, current assessment at 82.7 vs. 82.5 and expectations came out at 81.6 vs. a consensus of 81.5. While the numbers don't show improvement they have stabilized - at this point the market will take any signs of a turnaround. US data was also encouraging, durable goods and new home sales data beating expectations. These numbers have had some analysts calling a bottom - one asian fund manager explicitly saying it was the beginning of the recovery. The panicky reactions to Geithner's 'faux pas' yesterday only highlights the fact that risk aversion is not dead and continues to be a central them to current market dynamics. One would be cautious to believe those who need to see a bottom.

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Today Key Issues:

  • 09:30 GBP Retail sales (MoM) (FEB) -0.4% vs 0.7%
  • 09:30 GBP Retail sales (YoY) (FEB) 2.5% vs 3.6%
  • 12:30 USD Q4 GDP -6.6% vs -6.2%
  • 12:30 USD Personal consumption -4.4% vs -4.3%
  • 14:00 USD Geithner testifies to house financial panel on regulation
  • 21:45 NZD Q4 GDP (QoQ) -1.1% vs -0.4%
  • 21:45 NZD Q4 GDP (YoY) -2.0% vs -0.1%

The Risk Today:

EurUsd Pair traded a 1.3539 - 1.3618 range throughout the night as consolidation failed to break from prevailing wedge. Attempts at 1.3618 have been unsuccessful on two occasions; Euro rallies lack muscle to be sustainable, initial support seen at 1.3539 which would unlock 1.3449. On the upside, we're looking for 1.3650 (yesterday's high) which would set the stage for 1.3740.

GbpUsd Correction from 1.4515 as volatility sees pair retrace to 50.00% Fibonacci level at 1.4614. GILT failure yesterday for the first time since 1995 would refocus bears, especially as opinions on risk appetite's 'here to stay' status can be disputed. Initial support at 1.4614 would refocus 1.4510. On the upside persistent dollar strength aligns 1.4718.

UsdJpy Fails to overcome downward pressure, momentary spikes run out of steam in 98.22 - 98.57 resistance zone. Initial resistance at 98.57 aims for 98.99 unlocks potential for further gains. On the downside strong resistance stands at 96.93.

UsdChf Further Swissy gains see initial support at 1.1172. Momentum past 1.1111 unlocks potential for 1.0373 (Dec 29th low). A realistic return of a bullish trend would need strong Swiss haven status to wane in light of the greenback's current volatility.

EURUSDGBPUSDUSDJPYUSDCHF
1.3740S1.4987S99.75S1.1459 M
1.3650M1.4774S98.97S1.1323M
1.3618K1.4718S98.57S1.1246S
1.35601.454498.101.1262
1.3539S1.4614M96.93M1.1172M
1.3450M1.4590M95.58K1.1111M
1.3119K1.4510M93.54S1.0373K
S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot