The foreign currency futures collapsed across the board overnight, with the euro and Swiss in the lead. The rout was triggered by disappointing Eurozone economic data, ongoing pressure from Greece and by PBOC's decision to raise bank reserves by 50 basis points to 16.5% from 16%.
The German, Italy, Greece and the Eurozone preliminary GDP reports came in worse than expected in the fourth quarter, the Eurozone industrial production unexpectedly declined, and the French non-farm employment continued to drop in the fourth quarter.
The Asia/Pacific stock markets closed mixed, the European bourses are mixed, while gold and oil are down. The US stock markets are down in pre-open market; remember, further overall weakness is expected. All eyes are on the US economic agenda, which features the retail sales and business inventories reports, and the University of Michigan consumer confidence survey.
The short-term outlook for the foreign currency futures should remain bearish for the balance of the global day ahead of the long weekend. If order restores in FX, the yen should trade the opposite way. My model is short all of the European currencies and long the Aussie, Canadian dollar and yen.
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Overnight:
- Australia: No data
- China: The People's Bank of China raised banks' reserve requirement by 50 basis points to 16.5% from 16%, effective February 25.
- Japan: Consumer confidence rose to 39.4 in January from 37.9 in the previous month.
- Germany: The GDP stagnated in the fourth quarter, following a 0.7% rise in the prior quarter. Economists had expected a quarterly growth of 0.2%.
- France: The GDP rose 0.6% sequentially in the fourth quarter from +0.2% in the third quarter, revised down from 0.3% rise initially estimated.
- Italy: The GDP unexpectedly contracted a seasonally adjusted 0.2% in the fourth quarter after expanding 0.6% in the third quarter. On a yearly basis, the GDP contracted 2.8%.
- Eurozone: The GDP rose at a slower pace of 0.1% sequentially in the fourth quarter from 0.4% in the third quarter. On a yearly basis, the GDP fell 2.1%, slower than the -4% in the third quarter.
- Greece: The GDP contracted 0.8 percent in the fourth quarter after a revised fall of 0.5 percent in the previous quarter.
- Greece: The International Monetary Fund on Friday joined the European Union in pledging support for Greece in its struggle to bring its ballooning budget deficit under control and contain its debt crisis.
- Eurozone: Industrial production plunged by a seasonally adjusted 1.7% in December from November’s +1.4%, revised upward from +1%. Year-on-year, industrial output fell 5%, less than the revised -6.9% in November
- France: Non-farm employment declined 0.4% in the fourth quarter after a 0.5% fall in the third quarter. Year-on-year, non-farm employment dropped 2.5% in the fourth quarter.
- UK: The Conference Board leading economic index rose to 99.0 in December from 98.6 in the previous month. This is the ninth straight month in which the leading index has risen. The coincident economic index increased to 102.8 from 102.7.
Today’s Economic Calendar:
- Canada: New motor vehicle sales for December
- US: Retail sales for January
- US: Business inventories for December
- US: University of Michigan consumer confidence survey for February
EUR- March
Luca Model: Short since January 20
The March euro sank for a third day to mark a nine-month low amid nervous trading surrounding the Eurozone effort to help out Greece and regional economic weakness. The short-term outlook turned bearish for the rest of the day. The medium-term outlook remains bearish and my model is short. The target of a medium-term bearish flag is 1.3370 and the target of a short-term bearish flag is 1.3150.
The current low of the downtrend is 1.3531. Below 1.3483, distant support is at 1.3321.
Immediate resistance is at 1.3617. The next cap is 1.3710. Strong resistance is at 1.3818. The 21-day moving average lies at a very distant 1.3924.
INDICATORS
Fast stochastics: Slightly bearish
MACD: Slightly bearish
Ichimoku: Bearish
OUTLOOK
NEAR-TERM: Bearish
MEDIUM-TERM: Bearish
LONG - TERM: Bearish
JPY - March
Luca Model: Long since February 4
The March Japanese yen reversed Asian gains to an over one-week low and tested the bottom of its channel rising since January 8. The yen remains in an inside range. The short-term outlook is sideways. The medium-term outlook remains sideways and my model is long.
The 21-day moving average supports at 110.92 and the bottom of the channel is 110.65. Distant support is at 109.57.
Immediate resistance is at 111.54. Above 111.92, good resistance remains at 112.50. The top of the upmove is 112.95.
INDICATORS
Fast stochastics: Slightly bearish
MACD: Slightly bearish
Ichimoku: Slightly bullish
OUTLOOK
NEAR-TERM: Sideways
MEDIUM-TERM: Sideways
LONG-TERM: Bullish
GBP - March
Luca Model: Short since January 21
The oversold March pound has been alternating up and down days for four days, and remains under pressure. Basically, cable is consolidating at the bottom of its recent downmove. The short-term outlook is slightly bearish. The medium-term outlook is bearish and my model remains short.
Below 1.5583, the low of the downtrend is 1.5531. Further support is at 1.5469.
Strong resistance is at 1.5697. The next cap is 1.5769. The 21-day moving average resists at a very distant 1.5877.
INDICATORS
Fast stochastics: Sideways
MACD: Bearish
Ichimoku: Sideways
OUTLOOK
NEAR - TERM: Slightly bearish
MEDIUM - TERM: Bearish
LONG - TERM: Bearish
CHF - March
Luca Model: Short since January 20
The oversold March Swiss franc remained under pressure overnight, when it succumbed to a six-month low. The short-term outlook turned bearish for the rest of the day. The medium-term outlook is bearish and my model is still short.
The new low of the downtrend is .9236. Further support is at .9214 and .9158. Distant support lies at .9116.
Initial resistance is at .9297. Further caps are at .9337 and .9396. The 21-day moving average resists at a distant .9468.
INDICATORS
Fast stochastics: Bearish
MACD: Sideways
Ichimoku: Bearish
OUTLOOK
NEAR-TERM: Bearish
MEDIUM-TERM: Bearish
LONG-TERM: Bearish
CAD – March
Luca Model: Long since February 10 (reversing short since January 20)
The overbought March Canadian dollar slipped on profit taking overnight after rallying for three days to the highest level since January 22, but found a floor from the 21-day moving average. The short-term outlook is bearish early and then slightly bullish. The medium-term outlook is sideways and my model is long.
Initial support is at .9453 from the 21-day moving average. The 100-day moving average follows at .9411. Further support is at .9337. The low for the downtrend is .9274.
Immediate resistance is at .9556. The next cap is at .9586. Distant resistance is at .9680
INDICATORS
Fast stochastics: Bullish (overbought)
MACD: Bearish
Ichimoku: Bullish
OUTLOOK
NEAR-TERM: Bearish early, then slightly bullish
MEDIUM-TERM: Sideways
LONG-TERM: Bullish
AUD – March
Luca Model: Long since February 10
The March Australian dollar opens lower in the US after surging to a two-week high and closing above the 21-day moving average for the first time since January 19. The short-term outlook is bearish early and then slightly bullish. The medium-term outlook is sideways and my model is long.
Initial support is at .8769. Below .8719, distant support is at .8653.
The 100-day moving average resists nearby at .8809. The 21-day moving average lies at .8849. Further resistance is at .8911 and .8967.
INDICATORS
Fast stochastics: Bullish (overbought)
MACD: Slightly bullish
Ichimoku: Slightly bearish
OUTLOOK
NEAR-TERM: Bearish early, then slightly bullish
MEDIUM - TERM: Sideways
LONG - TERM: Bullish
