Month: February 2010

By GCI Forex Research

Fundamental Outlook at 1500 GMT (EDT + 0500)

€

The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3710 level and was supported around the $1.3620 level.  Dealers lifted the common currency during the North American session but the pair remains on a downward trajectory, having traded on Friday at its lowest level since May 2009.  PIMCO’s El-Erian today reported the global bond giant prefers German government bonds over U.S. Treasuries.  This statement highlights the drastic reassessment of sovereign risk the markets are currently undertaking.  Eurozone debt remains highly volatile and Greek 10-year paper is currently trading more than 400 bps wider than German 10-year paper.  The debt situations in Portugal, Spain, and Ireland are also causing the euro some weakness.  Dealers are currently focusing on the likelihood the International Monetary Fund will need to bail out Greece and perhaps some other European countries if they cannot manage their debt crises themselves.  Group of Seven officials finance ministers and central bankers convened in Canada this weekend and indicated they would continue their fiscal stimuli to prop the slumping global economy.  Some central banks, however, are unwinding their stimulus programs at the same time.  Many G7-watchers were unimpressed with the meeting as it failed to provide any significant new details about the level of international support Greece and other aggrieved countries can expect if bailouts are required.  Spain today announced it will reduce net debt issuance by 34% in 2010 in a bid to remove public debt.  Deutsche Bank today revised its forecast for official European Central Bank interest rates hikes and now sees the main refinancing rate at 1.5% by the end of the year, down from the previous forecast of 2.0%.  ECB’s Nowotny said every eurozone country needs to respect the bloc’s fiscal rules and said new financial regulations must not harm economic growth.  Data released in the eurozone today saw the Bank of France January business sentiment index print at 104, up from 102 in December.  Also, EMU-16 Sentix investor confidence fell to -8.2 in January from -3.7 in December, the first decline in seven months.  European Union officials will are convening this week to discuss a long-term economic strategy.  In U.S. news, traders are still evaluating Friday’s mixed January non-farm payrolls report and assessing U.S. economic data for clues as to when the U.S. labour market may improve.  St. Louis Fed President Bullard said the U.S. economic recovery is “on track” and reported “Maybe you get in the second half of 2010 or something like that, if things are going pretty weell, maybe then you’d sell a little bit (of assets from the Fed’s balance sheet) at that point and you’d try to see how the market reacts.” Former Fed Chairman Greenspan said he anticipates unemployment will remain in the 9% – 10% range in 2010.  Data to be released in the U.S. tomorrow include December wholesale inventories.   Euro bids are cited around the US$ 1.3530 level.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥89.15 level and was capped around the ¥89.55 level.  Traders continue to sell Japanese government bonds in the cash and futures markets as the markets continue to reduce exposure to sovereign risk.  The benchmark 10-year JGB is now yielding around 1.355%.  BoJ Deputy Governor Yamaguchi warned economic growth “may stall” temporarily and said “growth may be in a pretty severe state through this summer, so we can’t really expect a rapid expansion.”  The central bank continues to expect tepid economic growth with deflationary pressures at the consumer price inflation level through the fiscal year ending March 2012.  Data released in Japan overnight saw bank lending off 1.5% y/y in January, highlighting the broad lack of capital in Japan at this time.  The Nikkei 225 stock index lost 1.05% to close at ¥9,951.82.  U.S. dollar offers are cited around the ¥94.75 level.  The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥121.55 level and was capped around the ¥122.75 level.  The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥138.60 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥82.85 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8266 in the over-the-counter market, up from CNY 6.8265. The Chinese government reiterated it aims to keep inflation around 3% this year.  It appears likely People’s Bank of China will raise interest rates this year to control inflation and counter growing asset bubbles.  Group of Seven policymakers this weekend issued a discussion paper that calls for more currency flexibility, hardly the approach that many traders wanted officials to take with China.

₤

The British pound moved lower vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.5533 level and was capped around the $1.5625 level.  Chancellor of the Exchequer Darling reported he fully supports Bank of England’s asset purchase pause that was announced on Thursday, adding the U.K. gilt market responded well.  BoE has recently announced the weaker pound has benefited the U.K. economy.  The central bank will publish its quarterly inflation report and new economic forecasts on Wednesday.  In November, the central bank estimated 2010 economic growth of 2.2%, rallying to 4.1% in 2011. Most BoE-watchers believe the central bank will reduce its growth forecast this week and will likely see inflation around 2% in two years.  Cable bids are cited around the US$ 1.5340 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.8795 level and was supported around the ₤0.8730 level.

CHF

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0700 figure and was capped around the CHF 1.0770 level. Data released in Switzerland today saw December real retail sales up 4.7% while the January unemployment rate rose to 4.5% from 4.4%.  Some dealers are still talking about Friday’s reported intervention by Swiss National Bank in which the central bank is rumoued to have bid on the EUR/CHF cross some 280 pips above the current market price.  U.S. dollar offers are cited around the CHF 1.0810 level.  The euro moved lower vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.4645 level while the British pound came off vis-à-vis the Swiss franc and tested bids around the CHF 1.6680 level.

Forex Daily Market Commentary provided by GCI Financial Ltd.

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By CountingPips.com

The US Dollar has been mixed in forex trading as movements against most of the major currencies have been muted with little economic data released today. The U.S. dollar has gained ground versus the Canadian dollar, New Zealand dollar, British pound and the Australian dollar while losing ground to the Swiss franc. Against the euro and Japanese yen, the US dollar has traded virtually unchanged from the day’s opening exchange rates.

Economic news releases today showed that Switzerland retail sales increased by 4.7 percent on an annual basis in December from the December 2008 level, according to the Switzerland Federal Statistics Office. Retail sales had decreased by 0.1 percent on an annual basis in November.

Employment data, also out of Switzerland and released by the Federal Statistics Office, showed that the seasonally adjusted unemployment rate fell from 4.2 percent in December to 4.1 in January. The jobs data surpassed economic forecasts predicting the jobless rate to level at 4.3 percent.

The U.S. stock markets had a negative session today with the Dow falling by 103 points and closing under the 10,000 level for the first time since November. The Nasdaq decreased by 15.07 points and the S&P 500 declined by 9.45 points. Oil edged higher by $0.49 to the $71.68 level while gold gained by $13.50 to $1,065.70 per ounce.

In forex trading, the EUR/USD opened the day at 1.3643 and made an intraday high at the 1.3713 level before retreating lower. This pair’s movement was constrained between the 1.3700 and 1.3650 levels for most of the day as the markets took a breather after last week’s risk averse environment.  The EUR/USD fell by 183 pips in last week’s trading as the euro was hurt by news of Greece’s debt problem and the scrutiny of other areas with debt difficulties (Spain, Portugal).

EUR/USD Daily Chart -The euro falling against the U.S. dollar from the beginning of December after reaching the 1.5141 level on December 3rd. This pair fell below the 200-day moving average (in blue) in the middle of January for the first time since the beginning of May and touched an eight-month low last week.

By Fast Brokers – The AUD/USD is stabilizing above its psychological .85 level and our uptrend lines as the risk trade stabilizes across the marketplace.  A weekend of rest coupled Trichet’s reassurances the ECB and EU have Greece’s debt issue under control has allowed the Dollar to ease off of last week’s highs following its incredible rally.  However, downward forces remain considering the extent of last week’s pullback and the risk trade will likely need several fundamental and psychological developments to break free of its downturn.  The data wire will be relatively quiet over the next couple trading sessions, giving the risk trade an opportunity to consolidate as investors assess the damage.  However, investors should keep a sharp eye on the news wire concerning developments in the EU since debt scares in Greece and Portugal were the driving force behind last week’s surge in the Dollar.  Australia will bring economic fundamentals back into focus on Wednesday with the release of Home Loans data.  This data release could have a noticeable impact on the Aussie should the results stray from estimates.  The RBA’s decision to halt its rate hikes and a setback in Australia’s Retail Sales has created a bit of uncertainty.  Therefore, investors will be honing in on Wednesday’s release to get a better idea of how Australia’s economy is faring.  Furthermore, China will be releasing New Loans and Trade Balance data.  Hence, volatility could pick up towards the middle of the week.

Technically speaking, the AUD/USD has multiple downtrend lines serving as technical barriers along with the psychological .87 area.  As for the downside, the AUD/USD has multiple uptrend lines serving as technical cushions along with 2/5 and 2/4 lows.  Furthermore, the psychological .85 area could serve as a technical cushion should it be tested.

Price: .8681

Resistances:   .8692, .8711, .8729, .8749, .8763, .8780

Supports: .8662, .8647, .8627, .8607, .8587, .8562

Psychological: .85, .87, February highs and lows.

(click chart to enlarge)

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Fast Brokers – The USD/JPY is fluctuating below the highly psychological 90 level as FX markets cool down in the wake of last week’s heavy volatility.  Although the USD/JPY was holding up relatively well, the currency pair finally gave in to downward forces as investors exited the risk trade in a flurry.  Debt scares in Greece and Portugal combined with mixed global economic data sent bulls to the exits with the Cable and EUR/USD registering hefty pullbacks.  The USD/JPY was performing relatively well for a while since the BoJ’s dedication to fight deflation managed to counter the flight to the Dollar.  Furthermore, recalls from Toyota has placed a downward pressure on Japanese equites, a negative development for the Yen.  However, the USD/JPY slid late Thursday as the decline in the risk trade accelerated and the USD/JPY is currently attempting to stabilize.  The data wire will be relatively quiet until China’s New Loans and Trade Balance data.  Japan will also release Core Machinery Orders data during Wednesday’s Asia trading session, giving investors an idea of how industrial production is faring.  Meanwhile, investors should keep an eye on the news wire for further developments in the EU regarding Greece’s fiscal woes.

Technically speaking, the USD/JPY still has multiple uptrend lines serving as technical cushions along with 1/27, 2/5 and 2/4 lows.  As for the topside, the USD/JPY faces multiple downtrend lines along with 2/5 highs and the highly psychological 90 area.

Present Price: 89.25

Resistances: 89.40, 89.54, 89.72, 89.88, 89.99, 90.08

Supports: 89.13., 89.00, 88.89, 88.78, 88.63, 88.53

Psychological: 90, February highs and lows

(click chart to enlarge)

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Fast Brokers – The Cable is hovering around Friday lows after continuing its extensive decline in the wake of strong UK PPI data.  Friday’s resurgent PPI data couples with a similar CPI reading, indicating a pop in prices which could discourage the BoE from tightening liquidity.  However, Mervyn King recently stated that the central bank is not overly concerned about the recent rise in prices and implied that it is not indicative of a more lasting trend.  Regardless, there are many other reasons for the BoE to take a wait and see approach, including economic uncertainty in the EU and liquidity tightening in China.  Therefore, the Cable showed little hesitation in participating with last week’s route from the risk trade.  The risk trade will be relatively quiet for the next 24 hours, giving the risk trade an opportunity to calm down as analysts and investors assess the damage.  However, the data wire will begin to heat up again during Wednesday’s Asia trading session with key economic data releases from China and Australia.  Furthermore, the BoE will release its inflation report accompanied by a speech from King.  Meanwhile, investors should keep an eye on the news wire for any significant news concerning Greece and other troubled EU economies.  As we saw last week, developments in these countries can yield high volatility in the FX markets.

Technically speaking, the Cable has multiple downtrend lines serving as technical barriers along with intraday and 2/5 highs.  We’ve created some new uptrend lines, albeit tight ones, to serve as technical cushions along with the psychological 1.55 area.

Present Price: 1.5584

Resistances: 1.5601, 1.5639, 1.5690, 1.5717, 1.5758, 1.5775

Supports: 1.5572, 1.5558, 1.5533, 1.5502, 1.5470, 1.5444

Psychological: 1.55

(click chart to enlarge)

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Fast Brokers – The EUR/USD is settling and cooling as investors take a step back to revise their outlooks in the wake of last week’s aggressive selloff in the risk trade.  Trichet attempted to alleviate investor uncertainty by reassuring markets that the ECB and EU will make sure Greece takes care of its deteriorating fiscal situation.  Meanwhile, the data wire is relatively quiet until China releases its New Loans and Trade Balance data.  Hence, the FX markets have an opportunity to settle down over the next 24 hours should no new conditions flare up.  However, unions in Greece are threatening to strike on Wednesday as the government announces its plans for reducing the nation’s outstanding fiscal debt.  Should unrest swell in Greece this could disrupt markets once again.  That being said, the risk trade is still in a fragile state with downward pressure bearing down on the EUR/USD.  Meaning the EUR/USD will likely need a positive turnaround in fundamental data or an optimistic psychological shift to counter current negative forces.  The EU will remain quiet on the data wire until Friday’s German Prelim GDP, implying the Euro could follow the path of the Dollar for the time being barring any significant developments regarding Greece.  Speaking of EU data, Germany had a poor showing last week with Industrial Production and New Orders missing estimates.  Hence, it will be interesting how Germany’s Prelim GDP turns out at the end of the week.

Technically speaking, the EUR/USD faces topside technical barriers in the form of multiple downtrend lines along with intraday, 2/5 highs.  As for the downside, we’ve created a few new uptrend lines to serve as technical cushions along the psychological 1.35 level and May 2009 lows.  On a negative note, our uptrend lines now run through February 2009 levels, or the 1.27 area.  Hence, the EUR/USD’s downturn this month could signal a more lasting, medium-term decline.

Present Price: 1.3675

Resistances: 1.3693, 1.3721, 1.3744, 1.3781, 1.3806, 1.3831

Supports:  1.3650, 1.3628, 1.3610, 1.3587, 1.3563

Psychological: May 2009 lows, 1.35

(click chart to enlarge)

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Anton Eljwizat – The pair has recorded much bearish behavior in the past 2 weeks. However, the technical data indicates that this trend may reverse anytime soon. For example as described below, the daily chart’s signals that a bullish reversal is imminent. This might be a good opportunity for forex traders to enter the trend at a very early stage and at a great entry price.

• Below is the daily chart of the EUR/CAD currency pair.

• The technical indicators that are used are the William Percent Range, Relative Strength Index (RSI), and Slow Stochastic.

• Point 1: The Relative Strength Index (RSI) indicates that the price of this cross currently floats in the oversold territory, signaling upward pressure.

• Point 2: The Williams Percent Range has peaked near at the -100 marker, which means that there may actually be a strong level of upward pressure.

• Point 3: The Slow Stochastic indicates a bullish cross, signaling that the next move may be in an upward direction.

EUR/CAD Daily Chart

Forex Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Source: ForexYard

The dollar climbed to an eight month high versus the EUR on Friday after the release of the U.S. jobs report. Credit concerns in Europe are weighing on the market as traders have moved out of riskier currencies and into the safety of the dollar and yen.

Economic News

USD – Unemployment Rate Improves

The greenback was significantly stronger across the board at the end of Friday’s trading with the lone exception coming against the Japanese yen. Driving the dollar higher was a combination of a strong U.S. jobs report and European economic sovereign debt fears.

At the end of Friday’s trading, the EUR/USD was trading at 1.3677 from an opening price of 1.3741. The pair shed 1.3% of its value from the previous week. The GBP/USD was also trading lower, trading at the price of 1.5639 after opening at 1.5733.

The release of the U.S. Non-Farm Jobs report by the department of labor helped to continue the bullishness of the dollar’s most recent rally. Despite the loss of 20K jobs for the previous month after expectations of an increase of 10K, the unemployment rate dropped to 9.7%. This shows U.S. employment conditions are improving from their low point in the recession. An expectation for the next month may be positive job growth.

The jobs report capped off a strong week for the dollar. This trend may continue for the upcoming trading week as traders will be looking for further positive economic data to verify the trend of an improving U.S. economy. Traders should be eyeing both Wednesday’s U.S. Trade Balance and Thursday’s Core Retail Sales numbers for confirmation.

EUR – Sovereign Debt Fears Sinks the EUR

The EUR fell sharply as concerns over European sovereign debt pressured the currency. Economists focused on the budget deficits for the nations of Greece, Portugal, and Spain. Investors sold off riskier assets in general with the EUR being hit particularly hard. The EUR/USD fell at one point to a 12-month low.

Some investors are anticipating a potential default on sovereign debt payments, or a possible bailout by the European Central Bank (ECB). The President of the ECB, Jean-Claude Trichet, said no new steps would be taken at this time by the bank to aid the struggling nations. A last resort could be rescue loans by the International Monetary Fund. However, this could bring with it tough economic requirements as conditions of acceptance, creating uncomfortable social ills for the accepting nations.

An expectation of a potential bailout of the struggling nations has eliminated much of the demand for the EUR. This could also eliminate any potential economic growth the Euro-Zone economy was expected to produce this year. This could further hurt the EUR against the dollar as the U.S. may begin raising interest rates well before the ECB begins tightening monetary policy, creating an interest rate differential that traders may exploit.

JPY – Sovereign Debt Fears Boost the Yen

The yen was the lone major currency to appreciate against the dollar during Friday’s trading. The yen was boosted this past week due to the sovereign debt issues in the Euro-Zone. The flight from risky assets was a positive for the yen as risk aversion took center stage. As risk sentiment tumbles, the yen benefits.

The USD/JPY was trading lower against the dollar at 89.24 after opening Friday’s trading at 90.89. The EUR/JPY was also lower at 122.06 from 122.93. The currency fell 2.4% this week on European sovereign debt concerns.

Fundamentally, the fiscal concerns that shook the markets this past week should carry over into this week’s trading of the yen, driving the EUR/JPY lower. Technically, the EUR/JPY sits very close to its next major support level at 120.00. We could see the pair’s bearish run stall at this price level.

Oil – Spot Crude Oil Prices Plummet

The price of spot crude oil plunged this week after the dollar climbed to an 8-month high on European sovereign debt concerns and a better than expected U.S. jobs report. Fiscal problems in the nations of Greece, Portugal, and Spain threaten to disrupt the recovery of the European economy and affect the future demand for crude oil.

Despite the U.S. jobs report that showed a drop in the unemployment rate to 9.7%, crude oil prices found little support.

Spot crude oil prices finished Friday’s trading at $71.79 after opening the day at $73.71. Prices were down 1.3% for the week.

Traders this week will be focused on the developments in Europe surrounding the potential for a bailout of the struggling nations. The commodity markets need somewhat of a fundamental boost in order to find some support that has been lacking in the previous week.

Technical News

EUR/USD

The EUR/USD cross has experienced a bearish trend for the past 3 weeks. However, it seems that this trend may be coming to an end. The RSI of the daily chart shows the pair floating in the over-sold territory, indicating that an upward correction will happen anytime soon. Going long with tight stops might be a wise choice.

GBP/USD

The price of this pair appears to be floating in the over-sold territory on the daily chart’s RSI indicating an upward correction may be imminent. The upward direction on the 4-hour chart’s Momentum oscillator also supports this notion. When the upward breach occurs, going long with tight stops appears to be preferable strategy.

USD/JPY

The hourly chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, the 4-hour Chart’s RSI is already floating in the oversold territory indicating that a bullish correction might take place in the nearest future. Going long might be a wise choice.

USD/CHF

The USD/CHF cross has been experiencing much bullish behavior in the past 3 weeks. However, there is much technical data that supports a bearish move for today. The RSI of the daily and 4-hour charts indicates that the pair floats in the overbought territory, leading to the conclusion that a downward correction is imminent. Going short with tight stops may turn out to pay off today.

The Wild Card

Crude Oil

Crude oil prices are once again dropping, and it is currently traded around $71.40 per barrel. And now, the 4-hour chart’s RSI is giving bullish signals, indicating that crude oil prices might go up. This might give forex traders a great opportunity to enter a very popular trend.

Forex Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Fear continued to grip the capital markets last week, even though skepticism only had a major impact on the US markets on Thursday.  The equity and commodity markets consolidated and moved higher early during the week just to see trepidation creep in during the second half.  On the Forex market, the Dollar gave back some of its recent gains, but found support, which led to nice rally.  The Australian dollar, the Euro and the Pound all faced losses as investors fled to the U.S Dollar.

The week started off on a positive note in Europe on Monday, as the market was greeted with better than expected European PMI manufacturing.   Euro zone PMI manufacturing, climbed to 52.4 in January which was the highest since January 2008.  Regional reports from Germany (53.7 vs. 53.4 expected), France (55.4 vs. 54.7 expected) and Italy (51.7 vs. 51.2 expected) were also stronger than expected.  In the UK, the positive PMI manufacturing data was also constructive.  The PMI came in at 56.7 in January vs. 53.9 expected.

Over in the US, manufacturing data was very impressive and lifted sentiment at the start of the week. Factory sector activity booked its best performance in more than five years in January.  The Institute for Supply Management said its index of manufacturing activity moved to 58.4 in January, the best reading since August 2004, from 54.9 in December and 53.7 in November. Readings over 50 indicate expansion. Economists had expected the index to come in at 55.3.  Personal income rose by 0.4% in December, while personal spending rose by 0.2%, according to the Commerce Department. The rise in incomes was more than expected while spending advanced by less than economists had anticipated.

In addition, U.S. construction spending fell in December much more than expected, reflecting commercial real estate weakness and uncertainty over a government subsidy. Spending declined 1.2%, at a seasonally adjusted annual rate of $902.55 billion compared to the prior month.  It was the fifth decrease in six months. November outlays were revised way down and October was adjusted way up. Spending fell 1.2% in November; it was originally estimated down 0.6%.

On Tuesday the market had a respectable rally lead by Oil and Oil related stocks.  The rally in the petroleum markets were linked to a story in the “Wall Street Journal” that cited the recent potential reduction in floating storage at sea as a potential catalyst for higher oil prices.  The expected decrease of 27 million barrels by March combined with the light crude contract holding its 200 day moving average was enough for a powerful short squeeze.

On Wednesday the markets continued to hold steady after, private-sector jobs in the U.S. fell by 22,000 in January, the smallest drop since February 2008,  according to a national employment report published Wednesday by payroll giant ADP Inc.  The ADP loss is slightly below the 30,000 drop projected by economists. The estimated change of employment from November to December 2009 was revised by 23,000, from a decline of 84,000 to a decline of 61,000.  The ADP survey tallies only private-sector jobs, which excludes government workers.

On the Forex market, the Euro had a somewhat muted response to the EC’s official announcement on the Greek stability plan despite the recovery in the Greek bond markets.   The European Commission, as expected, backed the plan but introduced more measures to cut the deficit and introduced a compliance monitoring schedule.  The first report is due in mid-March with the second due in mid-May.

On Thursday, all hell broke loose.  Sovereign debt was the term that struck a bell for investors as European country debt worries spilled over into all asset classes.  The equity indexes were hammered with the S&P 500 Index down 34 points or 3% for the day.  The commodity markets were also down sharply with Crude Oil losing $4 dollars per barrel and gold losing 40 dollars per ounce.  The Euro reached its lowest level since May of 2009.  The cost of CDS contracts that insure the debt of a number of euro-zone nations with large budget deficits rose to new highs. The annual cost of insuring €10 million ($13.9 million) of Greek government debt against default for five years rose €26,000 to €423,000.

On Friday the markets seem to stabilize after a better than expected employment report, specifically the large change in the household employment rate.  The unemployment rate, calculated using a household survey, fell to 9.7% last month from an unrevised 10% in December, according to the Labor Department. Economists surveyed had forecast the jobless rate would edge higher to 10.1%.

Meantime, nonfarm payrolls fell by 20,000 compared with a revised 150,000 decline in December. Economists had expected payrolls to be flat. The December figure was revised down sharply from an originally reported 85,000 drop.

Forex

The Canadian dollar lost partial strength during the week, up until the surprise Canadian unemployment released on Friday.  There were 43,000 more Canadians working in January, according to Statistics Canada, about three times more than what economists were expecting.  The unemployment rate fell to 8.3 per cent from a revised 8.4 per cent in December.  The results were better than the expectations of economists, who were calling for 15,000 additional people working last month and a jobless rate of 8.5 per cent. From a technical point of view, overall market momentum had more of an effect on the USD/CAD sending it higher towards the end of the week. Even though Dollar strength could persist, the 200 day moving average should provide resistance for the USD/CAD, especially as indicators are pointing towards minor divergence.

The Australian dollar was also hammered after the RBA surprised the market by leaving its benchmark rate unchanged at 3.75% saying it needed more time to judge the effects of the previous three rate hikes.  The decision defied the expectations of all economists surveyed and sent 1-month T-bills yields up some 15 basis point.  Governor Stevens noted lenders had increased borrowing costs by about 1% compared with the RBA’s 75 basis point of hikes.  The RBA also made reference to Chinese moves to reduce the degree of stimulus in their economy and credit conditions in the major countries. To date the AUD/USD is sitting on its 200 day moving average.  A close below this level should bring further technical selling in the currency pair.

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USDCHF’s uptrend extended to as high as 1.0794 level and reached the upper border of the rising price channel on 4-hour chart. Minor consolidation would more likely be seen later today. However, further rally is still expected after consolidation and next target would be at 1.0900-1.1000 area. Support is at the bottom of the channel now at 1.0560, only fall below this level could indicate that the rise from 1.0132 has completed.

Daily Forex Analysis