Daily Report: Euro Weakens on Greece Concern. Dollar Firm ahead of GDP
Euro weakens further against dollar and yen today as concern on Greece intensified. Germany and France denied a report of an imminent EU bailout of Greece and sent Greece CDS up to 414 record 414 level which was the same as Dubai's CDS when it got a $10b bailout in December. The yield on 10-year Greek bonds rose to 7.15 percent yesterday, the highest level since October 1999 and up from 4.99 percent on Nov. 30. Euro is also additionally pressured as Portugal reported higher than expected budget deficit of 9.3% of GDP is 2009, even though it's still better than Greece's budget deficit of 13% of GDP. Sterling is also soft after S&P said they "no longer classify the United Kingdom (AAA/Negative/A-1+) among the most stable and low-risk banking systems globally," Asian stocks are also broadly down, following weakness in US equities, and saw Nikkei down more than -2% to 10198 level. Yen maintains overnight strength in Asian today while commodity currencies are soft. Dollar continues to remain firm in general after Bernanke was confirmed for a second term as Fed Chairman by the Senate on 70-30 vote.
Data released in Asia saw Japan Manufacturing PMI dropped to 52.5 in Jan, signaling lower pace of recovery. Unemployment rate unexpectedly improved to 5.1% in December. Household spending rose more than expected by 2.1% yoy in December. National CPI dropped -1.7% yoy in December with core CPI down -1.3% yoy. INdustrial production rose 2.2% mom, 5.3% yoy in December. Housing starts dropped -15.70% in December. Deflation should still be the main worry of BoJ. BoJ Governor Shirakawa said the bank is "prepared to act swiftly and decisively should concerns that financial market stability might be hampered reemerge."
Looking ahead, Eurozone CPI is expected to climbed to 1.2% yoy in January. Unemployment rate is also expected to rise to 10.1% in December, which should then be higher than US's 10.0%. M3 money is supply is expected to drop -0.5% yoy in December. Swiss KOF Leading indicator is expected to rise slightly to 1.71 in January. US Q4 GDP will be the main focus today and is expected to expand at 4.5% annualized rate. Canadian GDP is expected to rise 0.3% mom in November.
Dollar index continues to benefit from a weak Euro as well as risk aversion and rises further to as high as 79.14 today so far. We'd continue to expect further rise to 61.8% projection of 74.19 to 78.45 from 76.60 at 79.23. Break there will set the stage for next medium term target at 38.2% retracement of 89.62 to 74.19 at 80.08. Nevertheless, note that upside momentum is not too convincing so far. A break below 78.54 support will indicate that a short term top is in place and bring deeper pull back before staying another rally.
EUR/JPY Daily Outlook
Daily Pivots: (S1) 124.77; (P) 125.92; (R1) 126.76; More.
EUR/JPY fall resume by breaking 125.22 and reaches as low as 124.80 so far. At this point, intraday bias remains on the downside and further fall is still expected to be seen to 124.35 medium term support and then 100% projection of 138.47 to 126.88 from 134.36 at 122.77 next. However, considering mild bullish convergence condition in 4 hours MACD, a break above 127.08 minor resistance will indicate that a short term bottom is formed and bring stronger recovery before staging another fall.
In the bigger picture, the break of 126.88 support revives that case that medium term rebound from 112.10, which is treated as correction to long term down trend from 169.96, has completed last year at 139.21. Break of 124.35 support will further affirm this case. By then, we'll expect such long term down trend to resume for a new low below 112.10. On the upside, break of 134.36 resistance is needed to invalidate this bearish view and suggest that EUR/JPY is still in consolidation to rise from 112.10 only. Otherwise, outlook will remain bearish.
Euro weakens further against dollar and yen today as concern on Greece intensified. Germany and France denied a report of an imminent EU bailout of Greece and sent Greece CDS up to 414 record 414 level which was the same as Dubai's CDS when it got a $10b bailout in December. The yield on 10-year Greek bonds rose to 7.15 percent yesterday, the highest level since October 1999 and up from 4.99 percent on Nov. 30. Euro is also additionally pressured as Portugal reported higher than expected budget deficit of 9.3% of GDP is 2009, even though it's still better than Greece's budget deficit of 13% of GDP. Sterling is also soft after S&P said they "no longer classify the United Kingdom (AAA/Negative/A-1+) among the most stable and low-risk banking systems globally," Asian stocks are also broadly down, following weakness in US equities, and saw Nikkei down more than -2% to 10198 level. Yen maintains overnight strength in Asian today while commodity currencies are soft. Dollar continues to remain firm in general after Bernanke was confirmed for a second term as Fed Chairman by the Senate on 70-30 vote.
Data released in Asia saw Japan Manufacturing PMI dropped to 52.5 in Jan, signaling lower pace of recovery. Unemployment rate unexpectedly improved to 5.1% in December. Household spending rose more than expected by 2.1% yoy in December. National CPI dropped -1.7% yoy in December with core CPI down -1.3% yoy. INdustrial production rose 2.2% mom, 5.3% yoy in December. Housing starts dropped -15.70% in December. Deflation should still be the main worry of BoJ. BoJ Governor Shirakawa said the bank is "prepared to act swiftly and decisively should concerns that financial market stability might be hampered reemerge."
Looking ahead, Eurozone CPI is expected to climbed to 1.2% yoy in January. Unemployment rate is also expected to rise to 10.1% in December, which should then be higher than US's 10.0%. M3 money is supply is expected to drop -0.5% yoy in December. Swiss KOF Leading indicator is expected to rise slightly to 1.71 in January. US Q4 GDP will be the main focus today and is expected to expand at 4.5% annualized rate. Canadian GDP is expected to rise 0.3% mom in November.
Dollar index continues to benefit from a weak Euro as well as risk aversion and rises further to as high as 79.14 today so far. We'd continue to expect further rise to 61.8% projection of 74.19 to 78.45 from 76.60 at 79.23. Break there will set the stage for next medium term target at 38.2% retracement of 89.62 to 74.19 at 80.08. Nevertheless, note that upside momentum is not too convincing so far. A break below 78.54 support will indicate that a short term top is in place and bring deeper pull back before staying another rally.
EUR/JPY Daily Outlook
Daily Pivots: (S1) 124.77; (P) 125.92; (R1) 126.76; More.
EUR/JPY fall resume by breaking 125.22 and reaches as low as 124.80 so far. At this point, intraday bias remains on the downside and further fall is still expected to be seen to 124.35 medium term support and then 100% projection of 138.47 to 126.88 from 134.36 at 122.77 next. However, considering mild bullish convergence condition in 4 hours MACD, a break above 127.08 minor resistance will indicate that a short term bottom is formed and bring stronger recovery before staging another fall.
In the bigger picture, the break of 126.88 support revives that case that medium term rebound from 112.10, which is treated as correction to long term down trend from 169.96, has completed last year at 139.21. Break of 124.35 support will further affirm this case. By then, we'll expect such long term down trend to resume for a new low below 112.10. On the upside, break of 134.36 resistance is needed to invalidate this bearish view and suggest that EUR/JPY is still in consolidation to rise from 112.10 only. Otherwise, outlook will remain bearish.
