Last week's currency trading review

The Dollar was on the back foot for most of the week as currency traders ignored the risk aversion caused by middle east uprising with specific focus on the oil rich Libya. Attention was instead paid to the Central bank interest rate expectation with the US seen as one of the last to raise.  Q4 GDP was revised lower to 2.8% vs. 3.2% q/q.  The Euro continued to press higher as the market latched on to further comments from ECB officials regarding the need to fight inflation by hiking rates if need be. The catalyst for the inflation fighting rhetoric was the push higher in Oil since the Middle East crisis began to above the key $100 a barrel level. The ECB meeting this week will be closely watch for roadmap to raising rates. The EUR/USD gained +0.44% closing at 1.3753, after opening the week at 1.3692.

The Japanese Yen was very strong against the USD as the market bailed out of recent long USD/JPY positions and focus turned to the downside when Y82 was broken. Continued USD weakness could see Y80 tested although this level will cause comments from Japanese officials to grow louder. The USD/JPY fell -1.84% closing at 81.67, after opening at 83.17. The GBP was under pressure this week losing ground against most currencies on the back of concerns about the strength of the UK recovery. The MPC minutes did show a new member voted for a rate rise but this has been widely factored in and focus is now of the fundamentals of the UK economy. The GBP/USD gained -0.84% closing at 1.6117 after opening at 1.6252. The AUD rallied for most of the week after coming under pressure dues to stock market weakness on Monday. The rebound was formed on the back of rising gold and Oil prices which prompted inflation fears and calls for further rate rises from the RBA later this year. Q4 CAPEX was solid at 1.3% Q/Q. The AUD/USD gained +0.31% closing at 1.0175 after opening at 1.0143.

The Forex Trading Week Preview

In the States; On Tuesday, Bank of Canada is forecast to remain on hold at 1.0%. Also released, February ISM Manufacturing forecast at 60.5 vs. 60.8. Also Ben Bernanke testifies before congress. On Wednesday, FEB ADP Employment Change is forecast at 185k vs. 187k previously. On Thursday, Weekly Jobless Claims previously at 391k. February ISM Services PMI forecast at 59.7 vs. 59.4. On Friday, Nonfarm Payrolls Change forecast at 175k vs. 36k previously. The February Unemployment Rate is forecast at 9.1% vs. 9.0% previously. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; Swiss Q4 GDP is forecast at 0.5% vs. 0.7% previously. February German Unemployment forecast at 7.4%. Also released, EU Unemployment forecast at 10.0%. ON Thursday, ECB Rate announcement forecast at 1.0% with attention on the following press conference from President Trichet. In the UK, On Tuesday, February PMI Manufacturing forecast at 61.5 vs. 62.0. On Wednesday, PMI Construction forecast at 53.0 vs. 53.7 previously. On Thursday, PMI Services forecast at 53.9 vs. 54.5 previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; No Major news today. In Australia; On Tuesday, RBA rate announcement forecast at 4.75% vs. 4.75% previously. On Wednesday, Q4 GDP is forecast at 0.6% vs. 0.2% previously. On Thursday, January Trade Balance is forecast at 1550bn vs. 1981bn previously. We will provide our previews and reviews of these data releases in the daily summary.

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.3525

1.3649

1.3750

1.3826

1.3862

USD/JPY

80.93

81.13

81.70

83.54

83.75

GBP/USD

1.5987

1.6037

1.6090

1.6279

1.6299

AUD/USD

0.9944

0.9982

1.0150

1.0189

1.0228

XAU/USD

1382.00

1389

1413

1420

1424

OIL/USD

95.00

96.50

99.70

100.00

103.50





Euro - 1.3750

Initial support at 1.3649 (Feb 23 low) followed by 1.3525 (Feb 22 low). Initial resistance is now located at 1.3826 (Feb 3 high) followed by 1.3862 (Feb 2 High)



Yen - 81.70

Initial support is located at 81.13 (Feb 4 low) followed by 80.93 (Jan 3 low). Initial resistance is now at 83.54 (Feb 22 high) followed by 83.75 (Feb 17 High).

Pound - 1.6090

Initial support at 1.6037 (76.4% retrace of 1.5964-1.6274) followed by 1.5987 (Feb 16 low). Initial resistance is now at 1.6279 (Feb 3 high) followed by 1.6299 (Nov 4 High).



Australian Dollar - 1.0150

Initial support at 0.9982 (Feb 23 low) followed by the 0.9944 (Feb 15 low). Initial resistance is now at 1.0189 (Feb 8 high) followed by 1.0228 (Jan 3 high).

Gold - 1413

Initial support at 1389 (Feb 21 low) followed by 1382 (Feb 18 low). Initial resistance is now at 1420 (1407.97 plus 0.618 of 1396.30-1416.68) followed by 1424 (Jan 3 high).



Oil - 99.70

Initial support at 96.50 (Intraday Support) followed by 95.00 (Intraday Support). Initial resistance is now at 100.00 (Intraday Resistance) followed by 103.50 (Feb Spike High).





Written by Anthony Darvall