Forex News and Events:
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The dollar traded a mixed day yesterday as a flurry of economic data and a new program aimed at curbing the freefall of the housing market was announced by President Obama. The dollar rose against the Euro, Swissy and Yen on news that a $75Bn housing program would be set in motion in a bid to secure the very sector that spawned our current global slowdown in 2006. The dollar posted strong gains against the European currency during the day as the pair’s price action converged to form an intraday wedge which materialized a rebound which has been confirmed by breaking the 1.2620 resistance.
The Japanese Yen has captured all of our attention lately as it seems glimpses of renewed risk appetite have seen the pair steadily weaken against the dollar – a relationship that was inverse dollar strength biased until now (in comparison with the dollar’s price action against other currencies) – the question is if this can be sustained. Questioning the global haven status of the Nippon currency would be premature but the continued dismal economic data coming out of the world’s second economy has now dwarfed the repatriation and risk averse drivers of the currency as of late. Economists are forecasting an annualized contraction of the Japanese economy of -11.6%, this comes as a stark contrast and largely dwarfs the contraction of other large economies; -1.2% for the Eurozone, -1.8% in the UK and -3.8% in the U.S.
USDJPY failed to break the 88.70 trend line support on the 12th and never looked back, however the same happened after the 87.15 low in December but lost momentum passed 93.00 and the bullish move faltered at 94.64. Further pressure on the Yen will see the pair rise for now but discounting renewed risk aversion would be foolish at this point.
Focus today is on the dollar which could be seen to give back some of its gains as more data momentarily stunts the greenbacks advance – EURUSD moves have seen some consolidation – while the general sentiment remains bearish a momentary relapse of dollar weakness is expected. This said the U.S remains the only large economy to be ahead of the curve on an economic recovery plan. Not much in terms of news today – Philly Fed is expected to come out at -25.0 vs. -24.3, PPI expected to be better than expected at 0.2% vs. -1.9%.
