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Market Review:
Euro, Cable Yen Outlook
In a daily market review with TheLFB trade team, Dan Cook, Snr Market Analyst at IG Markets, looks at the impact of global trade, on the last day of the week, and the last day of trade for December options and futures contracts.
EUR/USD - After taking another massive drubbing yesterday, the Euro finally found some footing in the neighborhood of 1.4300 against the US Dollar. After bouncing off the 1.4305 level the Euro rallied just over 100 pips; however, heading into the European trading session it couldn't hang on.
Germany's Ifo Institute for Economic Research showed that optimism among businesses in Germany, the Eurozone's largest economic contributor, had continued to improve; however, this "feel good" statement was immediately offset when the ECB showed a much larger than expected decline of 4.6 Billion Euro's for November's Current Account Statement.
As of this writing, the Euro has given back almost all of the gains made since yesterday and is tenuously close to the 1.4305 support level formed yesterday. From a technical perspective, a break below 1.4300 could run a long way before additional support levels may be found.
GPB/USD - Somewhat shaking off yesterday's abyssmal UK Retail Sales Figures, Sterling is slowly stepping its way higher against the greenback. The Pound, similar to most risk currencies, did get a strong pop immediately following the Bank of Japan's Press conferece, and got another one following a report that showed Public Sector Net Borrowing had improved from 10.2 Billion Pounds all the way to 20.3 Billion Pounds.
Heading into the US trading day; however, the GBP has slid back about 100 pips from its earlier highs. As of this writing a small level of support for this pair has been found very near the 1.6150 level. While there are no scheduled US announcements today, and many would assume that it could slow down as we head into the weekend, there are a couple of equity events in the US which could create some volatility for the currencies as well so now is definitely not the time to become complacent.
USD/JPY - It has been all Dollar all day in this pair as the Bank of Japan (BoJ) kept the overnight call rate at 0.10% and vowed to beat deflation. The particular attention the BoJ gave to the topic of deflation has seemed to all but confirm the possibility that if the Yen remains at these historically strong levels, it will be only a matter of time before they step into the currency markets directly in an effort to weaken their currency.
While some may argue that the Yen is well off the early year highs and so there is no need for intervention; however, it is not the exact level that is probably most important, the extremely long time it has spent at these high levels that is cripling the Japanese export economy.
No scheduled economic announcements out of the US today; however, on the US equity exchanges it is Quadruple Witching Options Expiration and this afternoon will be the S&P's Quarterly Re-balance which could cause some late day equity volatility that translates directly into the currency markets as well.