M. Hewson: nessuna sorpresa dal Fomc, senza Hoening torna l’unanimità
FOREX MORNING COMMENT
London –27th January 2011
Last nights FOMC didn’t really promise to be particularly exciting or enlightening and it wasn’t. The Fed gave its now usual downbeat assessment of the US economy justifying the continuance of its bond buying program until the middle of this year. However the statement did acknowledge that job market conditions were improving, just not at a rate that would justify rowing back on QE.
If the more hawkish new members of the committee like Plosser and Fisher felt compelled to dive straight in and rock the boat with some hawkish comment they resisted the temptation, though that may change as the year progresses. Unlike previous meetings the panel vote was unanimous for the first time since 2009, as previous dissenter Thomas Hoenig no longer has a vote. In economic data out later today US weekly jobless claims are expected to come in around 410k, while durable goods for December are expected to have risen 1.5%, improving from a 1.3% decline in November.
The pound had a much better day yesterday rising strongly after the release of Bank of England minutes showed that Martin Weale joined fellow MPC member Andrew Sentance in calling for a 0.25% rate hike, due to the current high rate of inflation. However this decision was taken without the MPC committee having had visibility on Tuesday’s shock GDP numbers. Even so it will be interesting to see if this 7-2 split remains for the February meeting given what we found out this week. The euro continues to benefit from a lack of negative news flow with Ireland scraping through the first vote of its Finance Bill, and ECB President Trichet calling on member countries to extend the EFSF and allow it to buy government bonds. Concerns that German inflation figures will continue to rise in figures being released this morning are also underpinning the single currency after Trichet said yesterday that the ECB would take whatever steps it needs to in order to control rising prices.
EURUSD – a fairly tight range yesterday saw no change in view with risks remaining for a test higher. The single currency continues to hold above the 1.3580 50% area and while it does so it remains on course for a test of 1.3745 which is 61.8% retracement of the down move from the 1.4280 highs to the recent low at 1.2870. Looking at the peaks from 2009 at 1.5145 there is trend line resistance coming in just above 1.4050 and there is potential to see a test of these levels, if we break 1.3750. There is minor trend line support around 1.3650, which if broken could see 1.3580. On the downside we now need to see a move below 1.3410 to re-target the 55 week MA at 1.3270.
GBPUSD – yesterday the pound did what it does best and squeezed short positions, much against expectations after falling short of the 1.5710 target. The break back above 1.5860 looks as if it may well target a test back towards trend line resistance at 1.6030 from the 1.6300 December highs. A break of this trend line would then target longer term trend line resistance at 1.6170 from the 1.7045 highs in August 2009. While below this first trend line at 1.6030, bearish sentiment remains for a move towards the 1.5710 level, which is also a 50% retracement of the up move from the December lows at 1.5350 to the highs this month at 1.6060. The major support remains around the 200 day MA around 1.5430.
EURGBP – the single currency was unable to break through the 0.8690 level yesterday peaking at 0.8675. 0.8690 is the 61.8% retracement of the down move from the 0.8940 highs to the recent lows at 0.8285. It does appear that we may have run out of steam on the topside in the short term and while below this key resistance level at 0.8690 we could well see a fall back towards 0.8520. If we break 0.8700 we could see a test of trend line resistance at 0.8770 from the all time highs at 0.9805 in 2008.
USDJPY – the 81.80 remains the key support level as the yen continues to trade in a fairly tight range albeit with lower highs. Key support on a break below 81.80 lies at 81.20 which is trend line support from last years lows at 80.25. Yesterday’s FOMC saw US yields firm up again with the dollar again finding support just above 81.80. The target remains for a test of the 84.40/50 area on a break above trend line resistance from the recent highs at 84.50, currently at 83.05.