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

EUR/USD

The euro gained for a second day versus the dollar and the yen as the Fund proposed raising its lending capacity by as much as $500 billion to protect the global economy amid Europe’s debt turmoil. An IMF spokesman said in a statement that the Washington-based lender wants to increase its resources after identifying a potential need for $1 trillion in coming years. The IMF is studying options and will not comment further until it has consulted its members, the fund said. It also rallied against most of its major peers as Greek officials resumed negotiations with bondholders. Greek Finance Minister Evangelos Venizelos said talks on a debt-swap plan for his country are at a very fine point. Greece resumed negotiations with the Institute of International Finance which represents private creditors. There was a lengthy meeting and talks will continue today. The euro appreciated 0.9 percent to $1.2856 afternoon in New York after rising 0.5 percent.  The euro will continue under a massive pressure throughout the year.

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GBP/USD

Sterling rose 0.6 percent to $1.5433 though jobless rate at 16-year high. The U.K. unemployment rate reached its highest level since 1995, increasing concerns about the fragile state of the economy. However, people claiming unemployment benefits increased by less than expected in December. Data from the Office for National Statistics showed that the jobless rate was 8.4 percent of the economically active population during the three months ended November. That was the biggest since 1995 and larger than the 8.3 percent rate expected by economists. The number of unemployed rose 118,000 over the three month period to 2.68 million which has not been higher since 1994. In December, there were 1.60 million people claiming Jobseeker's Allowance, up 1,200 on the previous month. Analysts blamed weak economic activity, low business confidence and mounting public sector job cutting and it needs taking more serious steps to boost employment.

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USD/JPY

The yen is probably 25 percent overvalued and Japan’s days of trade and current account surpluses look to be finished. Japan appears to be losing its current account surplus capability. That, together with 1 percent bond yields and debt to GDP of 200 percent of GDP with a currency that’s probably overvalued by at least 25 percent. Japan’s ability to keep borrowing costs the second-lowest in the developed world depends in part on its position as a net holder of external assets. A strong yen cutting into company profits and exports may push the current-account balance into a deficit, pushing up bond yields and making it more expensive for the country to borrow. Japan’s currency reached a postwar high of 75.35 per dollar on Oct. 31 and an 11-year high against Europe’s common currency on Jan. 16 after Standard & Poor’s downgraded the credit ratings of nine Euro-area countries. Japanese authorities intervened at least three times last year to halt the yen’s rise and keep it from eroding the economy’s recovery from the Mar. 11 earthquake and tsunami.

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