Dollar Strong Despite Risk Appetite, Steady EUR/USD Eyes 1.3500

  • Dollar Strong Despite Risk Appetite, Steady EUR/USD Eyes 1.3500
  • Euro Climbs as ECB Members Ward Off Currency War, EU Meets
  • Japanese Yen Tumbles as BoJ Candidate, Eco Minister Demand Stimulus
  • British Pound Collapses in a Quick Return to 1.5650
  • Swiss Franc: SNB Here to Reiterate 1.2000 Floor...Concerns of Bearish Pressure?
  • Australian Dollar Balks at Tepid Risk Trends, Faces Growing Rate Cut Risk
  • Gold Breaks Congestion Early, Suffers Biggest Drop in Two Weeks

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Dollar Strong Despite Risk Appetite, Steady EUR/USD Eyes 1.3500

It may not seem like the US dollar was strong through the opening session of the week considering the EURUSD was little changed, but the individual currency certainly outperformed surrounding fundamental trends. While it is true that the world’s most liquid currency pair – EURUSD – was little changed through the day Monday, that is a reflection on dollar strength considering that the euro itself was up against all of its major counterparts. Furthermore, the greenback managed gains against most other counterparts. This would lead the Dow Jones FXCM Dollar Index (ticker = USDollar) to its biggest daily rally in over two weeks which lifted the benchmark above 10,300 to test the highest close since November 30, 2010. It’s an encouraging performance, but falls short of proving conviction in a serious bull trend through the week.

Measuring the fundamental winds in the financial and FX markets this past session, the greenback’s performance was notable as it wasn’t supported by a robust risk aversion effort. As the currency market’s favored reserve, the dollar chart tends to look like a mirror of the S&P 500 – a benchmark of the appetite for yield that has increasingly found support through stimulus. However, through Monday, global equities were mixed and little changed overall on the day. Furthermore, Deutsche Bank’s carry trade index rose to meet multi-year highs and the traditional VIX Index held below 13 percent. Overall, this is a lean towards risk appetite - though not a very aggressive one.

So, while the dollar’s strength is remarkable; it is not a very convincing performance outside of the standard fundamental themes we expect the currency to follow. In other words, if there is another concerted effort to move away from safety assets; the greenback is unlikely to hold back the tide. As the week wears on, we will see event risk that better taps into general sentiment. This past session, the G30’s call for investors to ramp up volume by $7 trillion in the world’s largest economies by 2020 or risk a global slowdown was a soft risk (one too far into the future to be deemed a problem for near-term speculation). The Eurozone Finance Ministers’ meeting tapped risk trends, but they didn’t offer up much to stir crisis fears (more on that below). Moving forward, GDP reports and a G20 meeting – which will supposedly center on a budding currency war – will carry more weight. Meanwhile, back at home, Fed Vice Chairman Yellen was leveraging the dollar’s low-yield issues by remarking that there was no guarantee that rates would rise once the central bank’s thresholds (on unemployment and inflation) were breached.

Euro Climbs as ECB Members Ward Off Currency War, EU Meets

Fundamentals were at work for the euro through the opening 24 hours of the new trading week – though we have yet to touch the nerve that will carry a full trend for the currency. Top billing heading into the session was the Eurozone (the 17 countries that use the euro) Finance Ministers meeting. The event was scheduled to cover such hot topics as Cyprus’ contentious bailout, Greece’s progress, the financial conditions for Ireland and Portugal, and bank recapitalization under the ESM program. There was a lot of potential in this meeting, but it was never fully realized. According to Eurogroup President Dijsselbloem, the meeting was a short one and most of the top issues were deferred to March. This likely means that Tuesday’s EU Finance Minister meeting will garner even less interest.

In the meantime, the Euro’s refusal to join the burgeoning global currency wars continues to play to immediate speculative interests. Two ECB officials made statements to rebuff calls to adopt an FX specific policy. Central banker Weidmann remarked that the euro wasn’t ‘seriously overvalued’ and that intervention historically ends in failure. The ECB’s Asmussen leveled his anti-FX policy view with France in mind.

Japanese Yen Tumbles as BoJ Candidate, Eco Minister Demand StimulusA conspiracy theorist would have a field day drawing scenarios of Japanese officials’ strategy for keeping the yen down. Yet, this may be an instance where such claims are true. In the past 24 hours, we’ve heard Prime Minister Abe repeat his call for the BoJ to do all it can to fight deflation. Finance Minister Aso said that he would tell the G20 Japan plans to continue its effort to fight deflation – rebutting suggestions they would back off to appease his counterparts. Most extreme, Eco Minister Amari said he wants the Nikkei 225 at 13,000 by the end of March.

British Pound Collapses in a Quick Return to 1.5650

The sterling plunged through the opening session of the week. The broad drop – excluding GBPJPY – was punctuated by the GBPUSD’s 140-pip drop that fully offset the advance carved out through the Thursday/Friday rebound. Is this a move that sustain momentum and break a four-year rising trendline? That depends on follow up catalysts. Risk aversion would certainly do it. Today’s CPI, though, carries less heft.

Swiss Franc: SNB Here to Reiterate 1.2000 Floor...Concerns of Bearish Pressure?

Policy officials are generally cheerleaders for their own economies and financial systems. Sometimes it can be difficult to draw out a genuine forecast from these involved market participants. Yet, opposing policy efforts can offer a surprisingly candid assessment. Therein lies the interest with the SNB’s Zurbruegg’s remarks that the Eurozone troubles still necessitate a 1.2000-floor for EURCHF.

Australian Dollar Balks at Tepid Risk Trends, Faces Growing Rate Cut Risk

Without a convincing bearing through risk trends – either FX or capital market-based – there wasn’t an overriding demand for the high-yield Australian dollar. Yet, considering the rather tame speculative bearing on the day, it seemed the currency has underperformed its potential. That may be due to a building speculation of a February rate cut from the RBA. Currently, the market probability for a 25bp cut is 49 percent.

Gold Breaks Congestion Early, Suffers Biggest Drop in Five Weeks

I was expecting a breakout from gold this week given the tight range that the metal was trading, but I didn’t think it would find resolution so early. Indeed, the precious metal dropped 1.2 percent Monday for the biggest drop in five weeks. The refusal from European authorities to join the currency war helps, but it may not be enough to progress this bear trend through important 1,640 support.

**For a full list of upcoming event risk and past releases, go to www.dailyfx.com/calendar

ECONOMIC DATA

GMT

Currency

Release

Survey

Previous

Comments

0:01

GBP

RICS House Price Balance

1%

0%

Showing positive trend following sharp fall from 3 yr. high of 18

0:30

AUD

RBA Credit Card Balances

$A49.5B

5 year up- trend, avg.: A$47070.6, high: A$50649, low: A$42514

0:30

AUD

RBA Credit Card Purchases

$A21.8B

0:30

AUD

NAB Business Conditions

-4

Business confidence strong in Dec, conditions downtrend unchanged.

0:30

AUD

NAB Business Confidence

3

5:00

JPY

Consumer Confidence

39.2

Dip from Sep following 2yr uptrend.

6:00

JPY

Machine Tool Orders (YoY)

-27.5%

Has steadily declined since 2011.

7:45

EUR

Current Account (EURO)

-3.5B

-2.9B

1 year average at -3.9.

8:15

CHF

CPI (YoY)

-0.3%

-0.4%

Inflation has increased from 06/12’s low when at -1.0.

8:15

CHF

CPI - EU Harmonised (YoY)

-0.3%

9:30

GBP

PPI Input NSA (YoY)

1.0%

0.3%

Has showed stability since 09/12.

9:30

GBP

PPI Output n.s.a. (YoY)

2.0%

2.2%

9:30

GBP

PPI Output Core NSA (YoY)

1.4%

1.5%

Has modestly recovered from 07/12’s low.

9:30

GBP

ONS House Price YoY

2.0%

2.1%

On an modest uptrend for 1.5 yrs.

9:30

GBP

CPI (MoM)

-0.5%

0.5%

Large swings in data set.

9:30

GBP

CPI (YoY)

2.7%

2.7%

No visible inflationary pressure.

9:30

GBP

Core CPI (YoY)

2.4%

2.4%

1 yr. avg. at 2.3, within target range

9:30

GBP

RPI (MoM)

-0.5%

0.5%

Large swings in data set.

9:30

GBP

RPI (YoY)

3.2%

3.1%

Rate of increase in retail sales prices has decreased over 2011-12

9:30

GBP

RPI Ex Mort Int.Payments (YoY)

3.1%

3.0%

Mort Int. Payments have limited effect on the overall RPI.

12:30

USD

NFIB Small Business Optimism

89.5

88

Has plummeted during 10-11/2012

15:00

USD

JOLTs Job Openings

3676

On an uptrend, yet increasing in a slower pace.

19:00

USD

Monthly Budget Statement

-$2.00B

-$27.41B

Large swings in data set.

21:30

USD

API U.S. Crude Oil Inventories

3625K

Has remained at a high level 01/13

23:30

AUD

Westpac Consumer Confidence s.a. (MoM)

0.6%

Largely subjected to political and economic concerns.

23:30

AUD

Westpac Consumer Confidence Index

100.6

Has modestly improved since 2012

23:50

JPY

Domestic CGPI (MoM)

0.2%

0.3%

Has fluctuated between -0.5 to 0.5 for over3 years.

23:50

JPY

Domestic CGPI (YoY)

-0.3%

-0.6%

Higher prices since 07/12.

23:50

JPY

Tertiary Industry Index (MoM)

0.7%

-0.3%

Large swings in data set.

GMT

Currency

Upcoming Events & Speeches

8:00

EUR

EU Fin Min Meeting on 2014 Budget, G-20 Preparation

10:00

CHF

SNB President Jordan Speaks in Geneva

13:45

CAD

BoC Carney Speaks at House Committee

15:30

EUR

ECB’s Draghi Speaks to Spain Prime Minister Rajoy

16:30

US

Fed's George Speaks on the Economy in Omaha, Nebraska

18:30

US

Fed's Lockhart Speaks in Madrid, Spain

SUPPORT AND RESISTANCE LEVELS

To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visit Technical Analysis Portal

To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit our Pivot Point Table

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CLASSIC SUPPORT AND RESISTANCE

EMERGING MARKETS 18:00 GMT

SCANDIES CURRENCIES 18:00 GMT

Currency

USD/MXN

USD/TRY

USD/ZAR

USD/HKD

USD/SGD

Currency

USD/SEK

USD/DKK

USD/NOK

Resist 2

15.5900

2.0000

9.2080

7.8165

1.3650

Resist 2

7.5800

5.8300

6.1150

Resist 1

15.0000

1.9000

9.1900

7.8075

1.3250

Resist 1

6.8155

5.7350

5.8200

Spot

12.7367

1.7761

8.9101

7.7554

1.2437

Spot

6.3945

5.5672

5.5043

Support 1

12.5000

1.6500

8.5650

7.7490

1.2000

Support 1

6.0800

5.4440

5.5000

Support 2

11.5200

1.5725

6.5575

7.7450

1.1800

Support 2

5.8085

5.3350

5.3040

INTRA-DAY PROBABILITY BANDS 18:00 GMT

Currency

EUR/USD

GBP/USD

USD/JPY

USD/CHF

USD/CAD

AUD/USD

NZD/USD

EUR/JPY

GBP/JPY

Resist. 3

1.3519

1.5777

95.43

0.9286

1.0119

1.0345

0.8446

128.27

149.48

Resist. 2

1.3490

1.5747

95.13

0.9266

1.0103

1.0323

0.8424

127.77

148.98

Resist. 1

1.3461

1.5717

94.82

0.9246

1.0086

1.0301

0.8403

127.26

148.48

Spot

1.3403

1.5657

94.20

0.9206

1.0054

1.0257

0.8360

126.25

147.48

Support 1

1.3345

1.5597

93.58

0.9166

1.0022

1.0213

0.8317

125.24

146.49

Support 2

1.3316

1.5567

93.27

0.9146

1.0005

1.0191

0.8296

124.73

145.99

Support 3

1.3287

1.5537

92.97

0.9126

0.9989

1.0169

0.8274

124.23

145.49

v

--- Written by: John Kicklighter, Chief Strategist for DailyFX.com

To contact John, email jkicklighter@dailyfx.com. Follow me on twitter at https://www.twitter.com/JohnKicklighter

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The information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. Forex Capital Markets, L.L.C.® assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. Forex Capital Markets, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. Forex Capital Markets, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.

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Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    1.2527-0.0002-0.01%
    USDSGD=X
    1.7300-0.0007-0.04%
    EURSGD=X
    2.1033-0.0008-0.04%
    GBPSGD=X
    81.7515+0.0188+0.02%
    SGDJPY=X
    6.1904+0.001+0.02%
    SGDHKD=X
    2.5849+0.0004+0.02%
    SGDMYR=X
    9,116.6738-34.5449-0.38%
    SGDIDR=X
    4.9691+0.0049+0.10%
    SGDCNY=X
    1.1687+0.0002+0.01%
    AUDSGD=X
  • Commodities
    Commodities
    NamePriceChange% Chg
    1,294.60-8.90-0.68%
    GCM14.CMX
    19.67+0.01+0.05%
    SIN14.CMX
    90.18-0.65-0.72%
    ^XAU
    3.04+0.02+0.51%
    HGK14.CMX
    104.59+0.83+0.80%
    CLK14.NYM
  • Bonds
    Bonds
    TreasuryYield (%)Yield Change
    1.73+0.08
    ^FVX
    2.72+0.08
    ^TNX
    3.52+0.06
    ^TYX

MARKET MOVERS

  • Most Actives
    Most Actives
    NamePriceChange% Chg
    0.115-0.002-1.71%
    B22.SI
    0.48+0.020+4.35%
    5GJ.SI
    2.27+0.090+4.13%
    5ME.SI
    2.190.0000.00%
    JS8.SI
    0.61+0.005+0.83%
    E5H.SI
  • % Gainers
    % Gainers
    NamePriceChange% Chg
    0.162+0.034+26.56%
    5GF.SI
    0.20+0.034+20.48%
    5WD.SI
    0.59+0.050+9.26%
    L5I.SI
    0.28+0.020+7.69%
    C33.SI
    0.215+0.015+7.50%
    5UE.SI
  • % Losers
    % Losers
    NamePriceChange% Chg
    0.103-0.010-8.85%
    5OS.SI
    0.112-0.008-6.67%
    5RC.SI
    0.355-0.025-6.58%
    KJ9.SI
    0.215-0.015-6.52%
    F9M.SI
    0.29-0.020-6.45%
    5PC.SI