Wednesday, January 19, 2011

Forex Morning Review | Optimism Favors Euro Comeback | 19 January 2011

Forex Morning Review | Optimism Favors Euro Comeback | 19 January 2011

Morning Forex Review: Optimism Favors Euro Comeback

Coming up Today (All Times GMT)

* GBP - Jobless Claims & Unemployment Rate (09:30)
* USD - Building Permits & Housing Starts (13:30)
* CAD - Bank of Canada Economic Outlook (15:30) & Press Conference (16:15)
* NZD - Consumer Price Index (21:45)
* CNY - Q4 Consumer Price Index and GDP


The euro strengthened yesterday, helped by investors' growing optimism. Several developments contributed to ease tensions on the euro debt market. Among them, Spain issued successfully short-term debt at a lower risk premium than precedent auctions. In Germany, financial investors surveyed by the ZEW improved their economic expectations for the six next months. Moreover, European officials announced plan to conduct more rigorous stress tests on banks. Altogether, this environment favored risk taking strategies and helped the euro hit $1.3450, compared to $1.3300 in the morning. Today, trading in the EURUSD could be more driven by the release of corporate results and US residential indicators.

EURUSD Support/Resistance: 1.3360 - 1.3400 / 1.3500 - 1.3585


Annual inflation shot up by 3.7% in December, surpassing economists' forecasts. As anticipated, the upward pressures came principally from the rise in food and energy prices. In reaction, the pound sterling spiked to $1.6050 before paring some gains to trade around the $1.6000 level. Today, investors will focus their attention on the employment situation. So far, the Bank of England has ruled out the scenario of prolonged inflation, arguing that the high level of slack in the job market would compensate the rise in the cost of living. Therefore, the release of the unemployment rate and the jobless claims - at 09:30 GMT - will attract investors' attention. If positive developments are observed, this could challenge the BoE monetary scenario and extend the bullish momentum of the pound against its major counterparts.

GBPUSD Support/Resistance: 1.5890 - 1.5950 / 1.6060 - 1.6100

EURGBP Support/Resistance: 0.8290 - 0.8335 / 0.8440 - 0.8500

January 19, 2011 -