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December 27, 2:00 AM: EUR/$..0.9294 $/JPY..113.97
European Trading Preview by Jes Black
At 2:45 AM France Nov PPI (exp 6.2% y/y, prev 6.5% y/y) France Nov PPI
(exp 0.3% m/m, prev 0.4%m/m)
Euro bidding dominated trading again today, as the dollar was lower
against every major currency except the yen, which fell across the board.
The euro climbed to a 5-month high of $0.9331 pushing the dollar's losses
to 11% against the single currency this month. The euro/dollar tested the
$0.9330 mark twice in Japanese trading but was unable to break through and
returned to the 93-cent level where it remains before the open of European
trading. The next target is seen at $0.9340 followed by $0.9375. Support
stands at $0.9265 and $0.9250. The euro also hit a fresh 10-month high of
106.55 yen with the Swiss/yen following to post a 14-month high of 69.85.
The euro's gains against the dollar and yen are reflective of the sharp
downturn in the US and Japan. The yen's fall to fresh 16-month lows vs.
the dollar, at 114.30, and 10-month lows vs. the euro was triggered by
Monday night's string of weak data, showing a fall in real household
spending and retail sales, a fall in CPI and rise in unemployment. The yen
remains depressed after yesterday evening's November industrial output
rose a mere 0.8%, following October's 1.5% rise. The soft economic data
highlights Japan's gradual return to recession from their ongoing recovery
mode. Dollar/yen resistance still stands at 114.30, a figure last hit on
Aug 18, 1999, with the next resistance seen at 115.75-80 followed by
In the US, Thursday's release of December consumer confidence is expected
to show another drop, conveying a deteriorating outlook in consumer demand
and in the wealth effect. The figure is expected at 131 from November's
133.5 and October's 135.8. Some forecasters expect the figure to fall to
as low as 127. Recall that consumer confidence has been a key indicator
these past 4 months in driving up the euro vs the dollar. The November
figure of 133.5 was the lowest in over a year. Falling consumer confidence
has also been shown in other surveys, such as the University of Michigan
Sentiment Survey, which last Friday released the December figure at 98.4
from November's 107.6. Later in the week, French November unemployment
figures are expected to show a further decline while in the US the
influential Chicago Purchasing Managers survey is likely to confirm
that the pace of activity in a key sector of the US economy is slowing
The opposing trends between the Eurozone and the US will have a bearing on
central bank policy in the coming year as the US is expected to start
easing short-term interest rates whereas the ECB will be more cautious.
This is important for the euro because in order for the single currency to
sustain its climb against the dollar, the Fed needs to show that the Funds
rate could fall as low as 6.0% by the end of the first quarter.
Meanwhile, UK goods exports to North America jumped 8 per cent to their
highest level ever in November, dispelling fears that the beginnings of a
US economic slowdown had already dented demand. Cable reached its latest
4-month high of 1.4884 and is now eyeing resistance at 1.49, which
currently represents the 200-day moving average. Support stands at 1.4720
backed by 1.4680.
Yesterday on Wall Street, high-tech shares deepened losses in early
afternoon trading amid selling from jittery investors locking in profits
from a 7% pre-Christmas holiday runup in the Nasdaq on Friday. US blue
chips advanced and technology shares declined in a session that focused on
continued negative earnings estimates and worsening sentiment about
sluggish holiday sales. Analysts report that retailers failed to make up
lost ground in the final days of the holiday shopping season, leaving them
to face the prospect of cutting prices even further in a retail
environment already plagued by deep discounts and heavy promotions. Today,
European stock markets are expected to open modestly higher as they catch
up with late gains made by the Dow and the Nasdaq on the last trading day
December 26, 7:00
PM: EUR/$..0.9300 $/JPY..113.69 GBP/$..1.4832 $/CHF..1.6300
Japanese Trading Preview by Ashraf Laidi
Asian markets will open today with data from Japan's industrial output
figures for November, expected to show a preliminary reading of + 0.2% m/m
according to Bridge, from October's 1.5%. The number, if realized, would
be in line with overall consensus of a slowdown in production, caused in
part by slowing exports to Asia. This is also in line with domestic
concerns from deteriorating equity conditions and corporations'
backtracking in capital spending. Ensuing negative sentiment in Japan will
require the figure to exceed expectations by a doubtfully considerable
margin to in order to provide the needed support for the ailing yen. The
Japanese currency was damaged anew in the last 24 hrs by a string of
negative data underscoring continuous erosion in consumer spending.
November Unemployment rose to 4.8% from 4.7%, while real household
spending fell 2.3% y/y following the previous month's -0.1%, undershooting
expectations of a 0.2% rise. Retail sales fell for the 44th consecutive
month. The Nikkei broke a 4-day losing streak yesterday, edging up 76 pts
at 14007, boosted by large exporters companies benefiting from the cheap
$/JPY reaffirmed its dominance of the 113 resistance level, closing at a
16-month high of 113.62, making a 114.35-40 an interim resistance before
the key 115.50 level. Support stands at 113 backed by 112.70.
The Japanese unit is expected to fall under continued pressure against the
euro, with the 106 yen level seen as an eventual target, reflecting the
contrasting prospects of the two currencies. While the respected Bank of
Japan is exploring further ways to revisit its recently abolished (in
August) zero interest rate policy from the current 0.25% policy.
NASDAQ's 23-pt drop reflects the status quo in global equities, which is
likely to give no fresh direction to the ailing Nikkei.
EUR/$ finished the US session just below 93-cents suggesting that a
renewed break of its latest 5-month high of 93.23 cents is imminent as US
economic data continues to falter. Thursday's Nov consumer confidence will
be a case in point.
EUR/$ resistance stands at 93.40 and 93.75. This could also suggest
further declines in $/CHF were light support stands at 1.63 backed by
1.6230. Cable'shovers at its latest 4-month high of eyeing initial
resistance at 1.4870 followed by key resistance point at 1.49 which
currently represents the 200-day moving average. Support stands at 1.4720
backed by 1.4680.
December 26, 4:00
PM: EUR/$..0.9320 $/JPY..113.57 GBP/$..1.4836 $/CHF..1.6263
EUR Hits 5 & 10 mth highs vs USD, Yen by Ashraf Laidi
It was another stellar session for the euro, as the single currency
ignored thin trading activity to surge to 105.90 yen and 93.23 cents. The
160-pt jump in EUR/JPY reflected the contrasting outlook for the two
currencies, exacerbated by the latest economic release from Japan.
Japanese Real Household spending fell 2.3% y/y in November, while retail
sales fell 0.7% y/y, posting their 44th consecutive monthly decline.
Meanwhile, nationwide Nov CPI fell 0.5% y/y, down for the 15th consecutive
month. While falling exports continue to hurt corporate spending, the
consumer sector remains hit by a resurging jobless rate (to 4.8% in Nov
from 4.7%) and consumers' inability to spend. The consumer sector is the
largest, and the weakest sector of the economy. Las week, BoJ Governor
Hayami made further remarks indicating resurging disinflationary forces in
the economy, further triggering speculation on the return to zero interest
The euro surge extended to the dollar, hitting a 5-month high at 93.23 and
gaining 7% on the month. On the year, the currency is down 13%. The euro's
rise lifted the sterling and Swissy along with it against the dollar,
giving cable nearly a full-cent rise to $1.4845, the highest in 4-months.
The dismal economic figures from Japan, pushed up $/JPY past the technical
113 level to a fresh 16-month high at 113.67 yen. The Nikkei closed
higher, ending up 76 pts at 14007 due to the decline in the yen which
aided major exporting companies.
US equities ended mixed, with NASDAQ down 23 pts and Dow falling 57 pts to
10692. Negative sentiment still looms due to continuous earnings
downgrades from companies and rating downgrades from Wall St forms as well
as tax pre-year-end selling by investors wanting to realize capital losses
against gains for the 2000 calendar year. The selling also intensified
last week after the Fed disappointed equity markets by not cutting
interest rates. Although the Fed's decision to ease the policy bias
surprised bonds and FX markets (which expected the bias to be moved to
only to neutral), equity players seem to want nothing less than a cut in
interest rates, shrugging any changes in the bias.
Yen players shift attention to tonight's release of November industrial
output from Japan following the 1.5% rise in October.
Thursday's release of US December consumer confidence is expected to show
another drop, conveying deteriorating outlook in consumer demand and in
the wealth effect. The figure is expected at 131 from November's 133.5 and
October's 135.8. Some forecasters expect the figure to fall to as low as
127. Recall that consumer confidence has been a key indicator these past 4
months in driving up the euro vs the dollar. The November figure of 133.5
was the lowest in over a year. Falling consumer confidence has also been
shown in other surveys, such as the University of Michigan Sentiment
Survey, which last Friday released the December figure at 98.4 from
December 22, 1:00
PM: EUR/$..0.9235 $/JPY..112.80 GBP/$..1.4766 $/CHF..1.64701
Euro Breaks 92 cents by Ashraf Laidi
The euro accumulated fresh gains today, extending a 3-day winning streak
to 3.5% against the dollar and 5% against the yen hitting--breaking a
fresh 9-month high resistance.
UR/$ is 30 pips away from its session high of 92.62, as the currency
continues to gain on default. The euro rallied 100 pts against the dollar
as the yield differential argument continued playing out in favor of the
single currency euro more than it ever did as the the ECB is the only G5
central bank that is the farthest away from an incipient rate cut. While
the Fed has clearly hinted in this week's FOMC meeting it will cut rates
in January, the BoJ and the BoE seem well in their way to cutting rates
according to the publication of the minutes of their meetings.
$/JPY made a fresh run-up past the 112.80s after BoJ governor Hayami said
the downward pressure on Japan has not disappeared, adding the central
bank will support the economy through monetary policy. Sterling pushing
above the $1.48 level.
US November Personal Spending came higher than expected, rising 0.4% from
0.2%, but the savings rate fell 0.8%, hitting a record decline.
US stocks rallied across the board, currently lead by NASDAQ's 139-pt rise
to 2479 and Dow's 121 pt gain to 10609.
FX trading activity will fall markedly over the next two weeks as players
leave for the holidays and let skeleton staff handle the work.
Characteristically though, currency have made sharp moves in these times
due to the lack of liquidity. Last year, there were abrupt moves in the
euro and the yen, with the Bank of Japan moving in to intervene to sell
the yen in order to prove its resilience to cap its currency despite the
holiday season. This time, we could see sudden moves in the euro as
markets start trading rumors of a possible emergency Fed meeting to cut
rates before its scheduled meeting on January 30/31.
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