http://quotes.ino.com/chart/?s=NYBOT_DXY0&v=iLast trade 83.68 Change +0.09 (+0.11%)
Settle 83.59 Settle Time 00:36
Open 83.67 Previous Close 83.59
High 83.76 Low 83.54
The March Dollar was slightly higher overnight due to light short covering as it consolidates above the 38% retracement level of this year's rally crossing at .8356. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near-term. If March extends the decline off last week's high, the 50% retracement level of this year's rally crossing at .8297 is the next downside target. Overnight action sets the stage for a steady to weaker tone in early-day session trading.
The March Euro was slightly higher overnight as it extends Tuesday's breakout above the 20-day moving average crossing at 129.684. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near-term. Multiple closes above the 20-day moving average would confirm that a short-term low has been posted while opening the door for a possible test of the reaction high crossing at 131.320 later this month. Overnight action sets the stage for a steady to firmer tone in early-day session trading.
The March British Pound was lower overnight as it consolidates some of this week's rally, which led to a close above the previous reaction high crossing at 1.8890. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near-term. Multiple closes above 1.8890 are needed to confirm an upside breakout of this year's trading range. Overnight action sets the stage for a steady to lower opening in early-day session trading.
The March Swiss Franc was higher overnight as it extends Tuesday's breakout above the 20-day moving average crossing at .8369. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near-term. This week's breakout above the 20-day moving average confirms that a short-term low has been posted while opening the door for a possible test of the reaction high crossing at .8415 later this month. Overnight action sets the stage for a steady to firmer tone in early-day session trading.
The March Canadian Dollar was slightly lower overnight as it consolidates some of this week's rally, which led to a breakout above the 20-day moving average crossing at .8075. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near-term. If March extends the short covering rebound off last week's low, a test of the reaction high crossing at .8206 is possible later this winter. Overnight action sets the stage for a steady to weaker tone in early-day session trading.
The March Japanese Yen was lower overnight and is working on a possible inside day as it consolidates some of Tuesday's rally, which led to a close above the 10-day moving average crossing at .9534. Stochastics and the RSI are bullish signaling that a low is in or is near. Multiple closes above the 10-day moving average crossing at .9534 are needed to confirm that a short-term low has been posted. If March extends the short covering rally off last week's low, the 20-day moving average crossing at .9620 is the next upside target. Overnight action sets the stage for a steady to weaker tone in early-day session trading.
FX Mixed Ahead of Greenspan http://www.forexnews.com/NA/default.aspThe dollar fell against the euro, but gained versus the sterling and yen in early Wednesday trading. In the coming session, traders will have much to digest with the release of January housing starts, capacity utilization, industrial production and Fed Chairman Greenspan’s congressional testimony.
Forexnews expects Greenspan to reiterate the Fed’s positive outlook on the economy, which includes maintaining the “measured tightening” mantra. More dollar support is seen in the event that Greenspan reiterates his confidence with the Administration’s “intentions” to reduce the budget deficit (regardless of unanswered questions on how to do it). While Greenspan should remain relatively silent in his prepared speech about the trade deficit and the dollar, we expect him to enlighten us during the Q&A session, where he is likely to be pressed on the sustainability of US dependence on foreign investment. His position on the subject has long been a sanguine outlook on the US markets’ ability to absorb an adjustment by foreign investors, yet he did hint to an eventual reconsideration of US assets by foreign investors
Cable Slumps on BoE Report
UK’s January claimant count declined by more than expected, falling by 11k, exceeding the 4.5k decline forecasted. The headline unemployment rate also unexpectedly dropped, falling to 2.6% versus 2.7% in December. The Average earnings figure was slightly softer than forecast, increasing by 4.3% in the 3mths to December, compared with expectations for a 4.4% rise.
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Yen Slumps on GDP
Data released earlier revealed that Japan’s economy slipped back into a technical recession in Q4. Japan’s Q4 annualized GDP fell 0.5%, contrary to forecasts for a 0.5% rise, marking its third consecutive quarterly contraction. Private sector consumption fell 0.3% q/q, worst than the expected 0.1% drop, while external demand of GDP contribution declined 0.2%. Furthermore, in order for Japan to meet its 2.1% government target for 2004-2005, the economy must grow by 2.1% in Q1.
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USDJPY climbed higher following the weaker than expected GDP figures, rising to 105.20. Resistance is seen at 105.40, followed by 105.80 and 106. Subsequent ceilings will emerge at 106.30, backed by 106.70 and 107. Meanwhile, support begins at 105, backed by 104.60 and 104.20. Additional floors are eyed at 104, followed by 103.80 and 103.50.
Euro Edges Higher in Range
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Foreign Flows Tumble But Still Sufficienthttp://www.forexnews.com/AI/default.aspCapital flows into the US dropped 31% to $61.3 billion in December after an upward revision in November to $89.3 billion from a previously stated $81.3 billion. Although the figure stood comfortably above the $56 billion trade deficit in December, the 31% slowdown took place in US treasuries, Agencies, stocks with the exception of corporate bonds.
POSITIVES
One of the few positives in the report is the 60% increase in net foreign purchases of US corporate bonds to $40.1 billion, the second highest of all time after September’s $44 billion.
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NEGATIVES
A 75% decrease in net US Treasury purchases to a 15-month low of $8.3 billion in December, following a 57% increase in November accounted for 87% of the total decline in net capital flows.
Net inflows into US equities fell 51% to $7.1 billion in December after having soared $408% to 4-year high, confirming that the November jump was post-election aberration cheering the continuation of the Bush tax cuts. The $7.1 billion figure was also a reflection of the rally in US equities, which was a follow-up to the post election rally. Considering the January sell-off in US equities (3.5% drop in S&P), we could see a further retreat in foreign purchases of US stocks.
Japanese purchases of US treasuries FELL 0.4% to $711.8 billion in December, following a modest increase in November and two monthly declines in the prior months. These three monthly declines in Japanese holdings of US treasuries are the first since October 2002. We have long held that Japanese authorities cannot afford stacking their $700+ billion chest of US treasuries when the dollar is expected to shed more of its value after an 18% decline in trade-weighted terms over the past 3 years. A gradual Japanese retreat from US dollar securities into non-dollar assets is inevitable in order to avoid massive losses on the central bank’s US dollar portfolios.
US residents’ purchases of FOREIGN assets hit a 5-year high, further underlining the quest by US investors to seek foreign alternatives to US assets considering the falling dollar. US purchases of foreign stocks shot up 81% to a 5-year high of $15.4 billion, while purchases of foreign bonds soared 116% to $6.2 billion, a level not seen July 2000—a time when the Fed began raising interest rates.
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