ECB sources: Final decision on Greek debt likely next week
The ECB is reported to have come to an agreement in principle
USDJPY finds sellers at the 100 day MA
The USDJPY moved higher last night. Contributing to the rise was a report that the Current Account surplus came in lower than expectations. This helped weaken the Yen and move the USDJPY higher. However, the pair found willing sellers on the run up against the key 100 day MA.That level came in at the 77.15 level. The high came in at 77.179 (see blue line in the chart above).
Selling against the key technical level forced the pair back lower where it found support against the 38.2% of the move up from last weeks low. That level came in at 76.74. The low came in at 75.702. The price is now trading near the underside of the channel trendline (see chart below) at the 76.88 level. A move above this level should lead to more buying support for the pair. However, I would expect that the sellers against the key 100 day MA (at 77.15) will keep a lid on rallies for the time being at least.
GBPUSD tested key resistance overnight
The GBPUSD moved up to key topside resistance overnight against the 50% retracement and the 200 day MA at the 1.5924 and 1.5937 levels respectively. The inability to extend higher led to a quick sell off during the London morning sesssion that took the price from the high at 1.5927 to the low at 1.5868. The 38.2% of the move up from yesterday’s low came in at 1.5873. When the price stalled at the level, the market started to form a base against the level. It currently trades in the middle of the range.
Trader’s who are long will likely take solace that the 38.2% found support buyers. However, that resistance against the 50% and the 200 day MA will be a big hurdle to overcome. Hence, I would look for any rallies toward the 1.5924-37 area to find intraday sellers. A break of the 38.2% would likely see more selling.
Greece hope keeps the EURUSD up. USDJPY tests 100 day MA
The overnight review
EU leaders “hoped” for a concrete conclusion to Greek political leaders meeting on Wednesday (that is today).
There was comment out of EFSF that they will probably play significant role in PSI and Greek programme. The
Bundesbank said that German exposure with haircuts is not critical. An economic “think Tank” said that German taxpayers may face a 25 bln Euro hit on Greek sovereign debt. Finally out of Greece there was a report that budget revenues were found lagging by a considerable 1 billion Euros in the 1st month. According to the report revenues posted a 7% decline compared with January 2011. The budget had targetted a 8.9% annual increase. The reported also said that VAT receipts posted an 18.7% decline in January compared to a year ago. The recession is not getting better but worse and more cuts on the way. In other news out of Europe, Germany’s Trade Balance worsened to 14.1 B surplus from 14.9B last month, but was better than expectations (13.9 B). However, both exports and imports showed declines (-4.3% and -3.9% respectively). This suggests a weaker German economy. Japan’s Current Account surplus came in weaker at 63T and this helped to weaken the JPY (increase the USDJPY) but that gains has not been sustained and the pair is opening the NY sesssion near yesterday’s closing level. The USDJPY reached the 100 day MA on the move higher (at 77.145. HIgh reached 77.17) but was not able to sustain any momentum above this key technical level. Swiss employment came in as expected at 3.1%. The EURCHF has gotten a boost from chatter from SNB’s Jordan yesterday that they remain committed to maintaining support at the 1.2000 floor. In economic data today, US Mortgage Applications already came out and showed at 7.5% increase from the previous week. Canada has Housing Starts for January due out at 8:15 AM. The expectations is for a decline to 194.0k from 199.9k last month. Yesterday, Building Permits rose by a surprising 11.1%.. NZD Unemployment comes out at 4:45 PM today w/ a gain of 0.4%. At 8:30 PM China CPI is due with 4% vs 4.1% YoY expected.
Italian PM Monti says wouldn’t mind if Italian banks tapped ECB funds to buy Italian bonds
The mentality of the market is that this is right. Central bank gives banks money at 1% or less and they buy Italian Bonds and earn the spread. The danger with such mentality is it promotes bubbles and takes the element of risk out of the equation. People buy because it is risk free. Much the same way house buying was risk free.
The US, UK, ECB flood banks with money, they buy bonds, interest rates come down and they hope for a recovery to happen. What if it does not (i.e.,the equivalent of house prices not going up)? What happens if they spur on a massive recovery and they have to unwind the trillions of dollars on their balance sheets and ignite inflation in the process which is out of control? What happens if the money goes into commodities and leads to multiple bubbles?
When too much money is sloshing around it encourages bad behavior. The focus is not on risk but solely on reward. Focus should be on risk first, then reward.
EURUSD moves above the 38.2% of the move down from October
The 38.2% of the move down from the October high to the low in January comes in at the 1.32429 level. Thehigh at the end of January stalled at 1.3226. Today, the level was breached and the price has since moved above the 38.2% retracement at the 1.32429 level. A close above this level will be eyed. If it can close above, traders will be looking toward the 100 day MA at the 1.3336 level (currently).
GBPUSD breaks above the February high and triggers stops
The GBPUSD has broken to new highs for February and looks toward key resistance at the 50% Fibonacci Retracement of the move down from the August 2011 high. That level comes in at the 1.5924 level. This is the next target for the pair. Not far above that level is the key 200 day MA at the 1.5937 level. I would expect that the market finds willing profit taking sellers against these levels.
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