Currency Pair Overview Majors Looking To Break Free From Monday’s Range

Overall, the currency market is looking for some additional momentum to break free from the tight ranges seen in the last day of trading. The majors found the strength to ignore the strong selling from the equity markets, and traded mostly side-ways. The only exceptions were the pound and the cad, which were driven lower fundamentally. Ahead, the market is expected to retain the relatively strong momentum from the Asian session, as today there are two rate cuts scheduled.

The Euro (EUR/USD) developed a tight range in the last day of trading, and it could not break out of it. The pair traded in a 50-pip range, swinging around the neutral pivot point. In the Asian session, the euro rose strongly, almost paring the declines seen one day ahead.

The Pound (GBP/USD) plunged yesterday 240 pips, being among the few pairs that managed to pull a decent trend in the last day of trading. Most of the declines came during the European session and in the early parts of the U.S. session, as the U.K. banks were again making the headline. In the Asian session, the pound traded mixed, in a small range.

The Aussie (AUD/USD) fell 100 pips in the last day of trading, breaking under the 0.6350 support level. Despite this, the aussie traded in a closed range during the intra-day session, and only during the U.S. market did the pair manage to break decisively under the neutral pivot point (0.6325). During the Asian session, the aussie rose 45 pips, even though the RBA reduced the monetary stance by 25 basis points.

Retail sales in Australia have increased by 0.2 percent in January which is higher than the analysts’ forecasts of a -0.5 percent decrease, but it is sharply lower than December’s 3.8 percent. In seasonally adjusted terms, food retailing, clothing and soft good retailing, cafes and restaurants all had increases in January while department stores, and household good retailing declined. The current account deficit fell 32 percent for the December quarter of 2008. This is the third straight quarter that the deficit has narrowed

The Cad (USD/CAD) advanced again in the last day of trading, gaining nearly 130 pips. During the intra-day session, the pair rose steady, closing the U.S. session just under TheLFB R2 (1.2920). The next upside resistance is around the 1.30 level, where the cad has already failed three times. Later in the day, the BoC is expected to reduce the monetary stance by 50 basis points.

The Swissy (USD/CHF) traded in a wide range yesterday. The upside resistance was formed by TheLFB R1 (1.1770), around the same level where the swissy topped on Friday, while the support was formed by the 1.1700 area. In the Asian session, the swissy lost 20 pips.

The Yen (Usd/Yen) plunged yesterday for a second consecutive day, as the equity markets saw some strong selling orders. The yen declined 65 pips at the end of the day, even though it never succeeded in breaking under the 97.00 level. In the Asian session, the pair tested once more the same support level, but bounced 40 pips higher.