Technical Analysis: EUR/USD, GBP/USD, USD/JPY, and USD/CAD

EUR/USD

The euro rose for the first time in three days against the dollar and the yen as Spanish and Greek borrowing costs fell at auctions, damping concern the region’s most-indebted nations will struggle to fund their deficits. Spain auctioned 12-month debt at an average yield of 2.049 percent, compared with 4.05 percent at a sale on Dec. 13. Greece sold 1.625 billion euros ($2.1 billion) of 13-week bills with a yield of 4.64 percent, down from 4.68 percent on Dec. 20.  Aside from a decent auction results, another reason why euro gained was a good figure came out from German ZEW Economic Sentiment which predicts economic development six months in advance. It surged to minus 21.6 from minus 53.8 in December, its second straight gain according to the ZEW center. The increase is the biggest since ZEW started the index two decades ago. It looks like recession in Europe is pretty less now and people starts having confidence and more bullish.  As a result from good numbers in Europe’s economic data, euro gained 0.6 percent to $1.2746 late afternoon in New York. It rose as much as 1.1 percent, the most on an intraday basis since Nov. 30.



GBP/USD

A leading indicator of the British economy declined for the fourth straight month in November. The leading economic index decreased to 102.5 in November from 103.1 in October which was lower by 0.3 percent than in September. In November, two of the seven components made positive contributions to the index. The fourth consecutive decline of the LEI for the United Kingdom in November highlights the growing risk of the British economy following the lead of the Euro Area into a recession. Meanwhile, the coincident economic index which measures the current situation remained unchanged at 10.2.4 in November after rising 0.1 percent in the previous month. In the six months ended November, the LEI dropped 0.9 percent, while the coincident index edged down 0.2 percent.  Due to the dropped of LEI, it added pressures on BOE to have QE on the table. The pound peaked at 1.5404 against the U.S dollar minutes before Wall Street opened.

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USD/JPY

Japanese Finance Minister Jun Azumi said that the Standard and Poor's downgrade of the European Financial Stability Fund will not change Japan's policy on EFSF bond buys. Reiterating his concerns over the euro weakness, Azumi said that he is closely watching the recent sharp drop in euro as it is likely to have a major impact on Japan's exporters. Meanwhile, the Japanese government maintained its economic assessment that the economy is picking up slowly. But the government downgraded its view on exports for the first time in three months. The Cabinet Office said difficulties continue to prevail due to the Great East Japan Earthquake.  The economy is expected to continue to pick up moderately. However, there are downside risks that could stem from further slowing down of less resilient overseas economies due to the Eurozone debt crisis which has been a cause for concern over the financial system and markets. Furthermore, an index measuring the activity of tertiary industry in Japan was down a seasonally adjusted 0.8 percent on month in November. That missed expectations for a contraction of 0.4 percent following the 0.6 percent increase in October. Industries that saw activity move lower included wholesale and retail trade; personal services; finance and insurance; scientific research and health care.

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USD/CAD

Bank of Canada Governor Mark Carney prolonged a record period of low interest rates to support an economy that he said would be hobbled by slowing growth in China, Europe and the U.S.  Carney kept his benchmark overnight rate at 1 percent for the 11th straight time, the longest stretch since the central bank began targeting that rate in 1994. Growth in Canada and the U.S. will be more modest than forecast in October as European leaders struggle to contain a debt crisis. Canada’s economy will expand by 2 percent this year and 2.8 percent next year, compared with an October forecast for expansions of 1.9 percent and 2.9 percent. The estimate of 2011 growth was increased to 2.4 percent from 2.1 percent. Carney said in a Dec. 12 speech in Toronto that Canada has to reduce its reliance on debt-fuelled household expenditures. Consumer spending helped the country exit recession in 2009 faster than other Group of Seven nations. His interest-rate freeze comes even as inflation exceeds his 2 percent target. Consumer prices rose 2.9 percent in November from a year earlier.  The average monthly gain in consumer prices through November was 3 percent on pace for the highest average pace since Canada adopted inflation targets two decades ago.  The central bank predicted in October inflation will slow to 1 percent by the middle of this year. The bank said that the economy will return to full output and the pace of price increases will accelerate back to its 2 percent target in the third quarter of 2013, one quarter earlier than it had forecast.

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