As we the week comes to end, the only big mover today has been the sterling once again but this time to the downside, with GBP/USD dropping 130 points in a few minutes after the retail sales release.

The pair printed a daily high at 1.9724 but was unable to hold on to its gains, what with retail sales printing a low number since January 2007. Many traders secretly believed that due to strong retail sales this December, the number would come out better than expected and therefore bought sterling ahead of the release. However the pound collapsed with the pair falling as low as 1.9560 where it found good support. The analysts now predict that BOE will keep easing the rates and some even speculate that if the economic data continue at this manner, we might see 4% at the end of this year. All hopes for the 2 level were crushed and now 1.9525 seems like the next possible target, ahead of 1.9480.

Apart from that, today it has been a slightly quiet day, with EUR/USD making a move above 1.4690 but was again unable to hold the level as dollar bulls took control once again.

The lack of economic data out of the US might keep EUR/USD in tight range between 1.46-1.47, however a clear break of 1.4590 might put 1.4525 as the next short term target.

Yesterday, US data disappointed once again, with Philly FED printing -20 instead of -1, which took the euro above 1.47. Traders were waiting for Bernanke for more clues as to what the bank will do regarding the next meeting and they indeed received their answer, as he basically implied that due to the fact that the economy is not performing well, the bank might act with more cuts in the near future. All carry trades got sold off, and DOW JONES lost more than 300 points.The recession scenarios are stronger than ever and that makes trading in risky positions quite fragile.

Next week the economic calendar is almost empty from the US, with existing home sales being the only important news. That alone might give the chance for currencies to consolidate as the last week of January we have all shorts of important economic data, starting with FOMC rate decision, durable orders, non farm payrolls and many many more.

Let’s see how the currencies will behave towards the New York close and if GBP/USD manages to close the week below 1.96. and EUR/USD below 1.46…