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EUR/USD -1.2900 Holds For Now

Last updated 4/22/2009 5:37 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

Top Stories

• Stress tests may be due out Friday
• BOJ may cut growth to -5.0% vs -3.0% for 2009 fiscal year
• UK jobless rate to highest since 1997 but claimant count change better than feared
• Equities Nikkei barely
• OIl drips lower to $48/oz.
• Gold at 883/oz.

Overnight Eco

• JPY Trade Balance 11B vs. -5B eyed
• AUD CPI colder at 0.1% vs.0.5%
• GBP Claimant Count Change 73.7K vs. 118K eyed
• GBP MPC Meeting Minutes 0-9 as expected
• GBP Average Earnings Index only 0.1% vs. 1.4% forecast
• GBP Public Sector Net Borrowing 19.1B vs. 15.6B
• GBP Prelim M4 Money Supply 0.0% vs. 1.2%
• GBP Unemployment Rate 6.7% as expected
• GBP Annual Budget Release ______

Event Risk on Tap

• CAD Leading Index
• USD HPI

Price Action

• USD/JPY drips lower to 98.00 in Asia until slight rebound to 98.25 in Europe risk flows rule
• AUD/USD sells off back to 7000 on weak CPI and risk aversion
• GBP/USD unemployment data bit better but cable trades below 1.4600
• EUR/USD remains pressured at 1.2900 but so far support holds

The dollar continued to strengthen against the high beta currencies throughout the Asian and early European trade today as risk aversion and mixed economic news continued to weigh on euro, pound and Aussie. With little economic data on the calendar the pro-dollar flows that have dominated trade since the start of the week continued, but EUR/USD managed to hold the 1.2900  figure despite several attempts over the past few days to take the pair lower.

With no eco data on the docket euro was hurt early by comments by Axel Weber that there are no “economic green shoots” in German or Eurozone economies. As we noted yesterday, the true measure of the health of the EZ economy will become more evident tomorrow when the market sees the PMI composite data.

Although sentiment in the region may have improved, the  activity in the services and manufacturing sectors will provide a much better clue as to whether the EZ economy will see any rebound in H2 of 2009. For the time being the market has reached a state of relative equilibrium, but if tomorrow brings yet another nasty downside surprise the 1.2900 level could finally give way  and take the pair all the way to the next level of support at 1.2750.

Meanwhile, cable had the most active economic calendar tonight with jobless claims, MPC minutes and budget data all on the docket, but the news proved to be a mixed bag for the UK economy. On the one hand, the steep contraction in unemployment claims (-73K vs.- 118K eyed)  is clearly an encouraging sign that perhaps the worst of the job liquidation is over as UK economy forms a sustainable bottom. On the other hand the weak gains in average earnings which rose 3.2% versus 3.5% the period prior along with the elevated unemployment rate indicate that consumer demand will remain depressed for the foreseeable future.

The North American session is once again empty of any economic news and earnings will dominate equity trade today as well.  Currencies may remain quietly range bound for the rest of the day, unless US equities reverse yesterday’s gains in which case the greenback could see further strength on safe harbor flows as the day progresses.

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.