Prepare for this week’s monetary policy decisions

With no clear solution yet in sight for the eurozone, the Bank of England (BoE), the European Central Bank (ECB) and the Reserve Bank of Australia (RBA) are holding their monetary policy meetings this week.

Is an interest rate cut in Australian interest rates a done deal?

Data showed that Australia’s economy may be slowing down. Retail sales fell unexpectedly in December while the latest job figures support the view that the Australian economy may be affected negatively by the growing eurozone debt crisis. In addition, inflation is no longer a threat for RBA as the strong Aussie drove down prices and eased inflation pressures. It appears that the strong Aussie further justifies speculation for a rate cut on Tuesday February 07 at 03:30 GMT. Against the dollar, the Australian dollar jumped to a six month high and versus the single currency it reached a record peak. The significantly better than expected jobs data from the US was translated to hopes for an improved global economic outlook supporting the Aussie.

In the scenario where RBA keeps the benchmark interest rate at 4.25%, the Aussie may strengthen as the market is pricing in a 25 basis points rate cut on Tuesday. It will be a difficult decision for RBA policymakers as the global economy does not appear to be as dark as it was in late 2011. However, based on the softer inflation pressures, the strong Aussie, lower consumer spending and weakening economic growth RBA may cut interest rates to 4% causing the high yielding currency to drop.

More QE by the Bank of England?

The BoE is also expected to hold its monetary policy this week on Thursday February 9 at 12 GMT. As the UK economy is struggling to prevent a double dip recession, the BoE is expected to launch another round of quantitative easing (QE). Investors expect the central bank to announce a 50 billion pound expansion of its asset purchasing program and leave interest rates unchanged at 0.5%. In October, the bank announced a further 75 billion pound expansion of the QE program and since the program started in March 2009, 275 billion pounds worth of bonds were purchased.

Recent economic data showed that the UK Manufacturing and Services sector rose to the highest level in ten months. Also, positive data from the eurozone and strong jobs numbers from the US further strengthened optimism in the market. Thursday’s decision is not easy for MPC policymakers. In the scenario where the central bank announces to pump 50 billion pounds into the UK economy, sterling may be put under pressure seeking new lows. In the scenario where no change in the QE programme is announced, sterling may strengthen on hopes that the UK economy is now on the road to recovery.

Focus on the European Central Bank monetary policy decision

Investors’ eyes will also be turning to the European Central Bank policy meeting due on Thursday February 9 at 12:45 GMT. As the eurozone debt crisis deepens, the ECB has injected billions of euros into the banking system in order to support the ailing economy. Economists forecast that the eurozone may be entering recession in 2012 while European leaders struggle to achieve a better fiscal union. Government bond yields of Italy, Spain and France retreated from unsustainable levels while Greece is in the middle of talks with its private creditors in order to reach an agreement to avoid default. In the scenario where a rate cut of 25 basis points is announced, we may see the euro weaken as the market is uncertain about ECB’s next move. In the scenario, where interest rates are kept unchanged then euro may find support.

Investors’ real focus will be on the press conference by ECB President Mario Draghi at 13:30 GMT, where signals for the future monetary policy will be closely watched. In a scenario where Draghi emphasizes on the heightened eurozone debt contagion risk and adopts a dovish stance, expectations for additional easing and a possible zero interest rate policy may rise. This may trigger a sell-off in the euro. Whatever the outcome, Thursday will provide an insight into Europe’s future economic picture.

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Prepare for this week’s monetary policy decisions is an article from:

The US dollar recorded minute gains on a day that the US financial calendar was lackluster. Investors are expected to closely monitor the testimony of the Federal Reserve Chairman Bernanke on the economic outlook and federal budget situation before the Senate Budget Committee at 15:00 GMT.

The Australian dollar was soft versus the US dollar overnight, but the decision of the Reserve Bank of Australia to leave its lending rate untouched this morning, send the pair to a 6-month high at 1.0809.

Oil prices fell to 97.15 dollars a barrel from 97.33. Gold dropped to 1720.03 from 1730.54 an ounce against the US dollar. Versus the euro, gold moved down to 1310.10 from 1313.29. Silver opened and closed at 33.63 dollars an ounce.

Equities	EUROPE				US				ASIA3
	FTSE 100	-0.15%			S&P 500	-0.04%			NIKKEI	-0.13%
	DAX	-0.03%			DJIA	-0.13%			HIS	-0.23%
	CAC	-0.66%			NASDAQ	-0.13%			CSI 300	-1.85%

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EU Morning Report – EU on hold as Greece stalls is an article from:

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U.S. Dollar Trading (USD) stocks pared back some of the Jobs data with Greece missing the deadline for a deal and extending talks to avoid a default amongst warnings from the rest of Europe to find a solution. Traders continued to buy on pull backs however and stocks rallied off their lows in the US session and the EUR/USD and other risk assets bounced into the close. In US stocks, DJIA -17 points closing at 12845, S&P -1 points closing at 1343 and NASDAQ -3 points closing at 2904. Looking ahead, FED Chairman Bernanke Speaks. December Consumer Credit forecast at 7.7bn vs. 20bn previously.

The Euro (EUR) dipped towards 1.3000 as Greece missed the deadline to come to an agreement with the troika about a second bailout package and continued the talks into the night with the IMF/EU. German Industrial Orders jumped 1.7% in December vs. a -4.9% drop in November. EUR/JPY is providing support but EUR/GBP is still very heavy. Looking ahead, December Industrial Output forecast at -0.3% vs. -0.6% previously.

The Japanese Yen (JPY) the USD/JPY failed to extend gains and fell back as the USD came under pressure in the US session. The Y76.50 is the support and holding firm so far as the market looks to more US data and the EUR/JPY to see if Yen weakness can continue this week. The MOF confirmed more stealth intervention in the past 3 months but only through the USD/JPY.

The Sterling (GBP) Cable was bought aggressively on a pullback to 1.5730 to close back above 1.5800. The market expects the BOE to increase the Asset purchase program by 50bn at Thursday’s meeting. EUR/GBP is moving towards the 0.8250 support and a break could lead to 0.8000 on the cross and 1.6000 on the major. Looking ahead, BRC Retail Sales previously at 2.2%.

Australian Dollar (AUD) the AUD/USD consolidated the rally on Friday but did test the 1.0680 support level after the December Retail sales fell -0.1% vs. 0.2% forecast. The AUD/JPY was also supported below Y82 with traders looking to the firm resistance at Y85 in coming weeks which will correspond to the 1.1000 all-time high on AUD/USD. Looking ahead, RBA Rate announcement forecast to cut to 4.0% vs. 4.25% previously.

Oil & Gold (XAU) Gold fell back for a second day as the market continued to liquidate long positions searching for support eventually found under $1720. OIL/USD pivoted the $97 but the selling has stopped seen last week as the energy fell below $100.

Pairs to watch

EUR/USD Showing Resiliance

XAU/USD looking to resume rally?

TECHNICAL COMMENTARY

Euro – 1.3120

Initial support at 1.3000 (Big Figure Support) followed by 1.2931 (Jan25 low). Initial resistance is now located at 1.3151 (Feb 6 high) followed by 1.3386 (Dec 12 high)

Yen – 76.55

Initial support is located at 76.00 (big figure) followed by 75.35 (Big Figure). Initial resistance is now at 76.87 (Jan 23 low) followed by 77.82 (Jan 26 high).

Pound – 1.5820

Initial support at 1.5642 (Jan 27 low) followed by 1.5517 (Jan 23 low). Initial resistance is now at 1.5889 (Nov 18 high) followed by 1.5932 (Nov 15 high).

Australian Dollar – 1.0725

Initial support at 1.0573 (Jan 23 high) followed by the 1.0428 (Jan 4 low). Initial resistance is now at 1.0765 (Sept 1 high) followed by 1.1007 (Aug 2 high).

Gold – 1720

Initial support at 1702 (Jan 26 low) followed by 1649 (Jan 25 high). Initial resistance is now at 1738 (Feb 6 high) followed by 1763 (Dec 2 high).

Oil – 97.30

Initial support at 96.00 (Intraday Support) followed by 95.00 (Intraday Support). Initial resistance is now at 98.50 (Intraday resistance) followed by 100.00 (Intraday Resistance).

Written by Anthony Darvall

Written by Easy-Forex

Daily Outlook – Greece Talks Extended, Euro Holding above 1.3000, RBA Today is an article from:

The US dollar recorded loses last week as economic data showed strengthening US labour and boosted demand for risky currencies. Monday morning is showing a reverse in sentiment, as developments in Greece induce risk aversion, with the greenback experiencing buying pressure.

The Australian dollar carried on its 2012 appreciation during last week, rising to 1.0750 from 1.0591 versus the US dollar. The Royal Bank of Australia will decide on whether to cut or leave its lending rate untouched, tomorrow.

Oil prices opened at 97.48 dollars a barrel from 97.08. Gold rose to 1727.98 dollars an ounce from 1725.83. Silver opened at 33.6450 dollars an ounce from 33.6250.

Equities	EUROPE				US				ASIA3
	FTSE 100	1.81%			S&P 500	1.46%			NIKKEI	1.10%
	DAX	1.67%			DJIA	1.23%			HIS	-0.14%
	CAC	1.52%			NASDAQ	1.61%			CSI 300	-0.07%

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EU Morning Report – More austerity demanded from Greece is an article from:

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U.S. Dollar Trading (USD) stock markets enjoyed some solid gains on the back of the January’s NonFarm Payrolls surging to 243k vs. 170k forecast and the Unemployment rate falling to 8.3% from 8.5%. The USD was not sold off as usual but instead able to hold near the opening levels with Gold and the Euro under pressure. In other data we saw January ISM services jump to 56.8 vs. 53.0 previously. In US stocks, DJIA +156 points closing at 12862, S&P +19 points closing at 1344 and NASDAQ +45 points closing at 2905k.

The Euro (EUR) fell post US jobs number with the disparity between the two economic recoveries becoming more evident. The other issue is concern that the Greece politicians are facing too much pressure from their people to accept tough new additional austerity measures and as the deadline approaches the chances of default and Greece leaving the EU are increasing. A decision is expected today from the Greece parliament. Looking ahead, December Industrial Orders forecast at 0.9% vs. -4.8% previously.

The Japanese Yen (JPY) the USD/JPY responded to the positive US jobs numbers moving back to the Y76.60 level after spending the past 48 hours testing Y76. The number while not reversing the downtrend do add to the argument the US economy is improving and if we see US housing stabilize or reverse then US interest rates may begin to increase sooner.

The Sterling (GBP) the GBP/USD eased slightly as the USD remained stable post jobs number and the Euro fell. The EUR/GBP did continue to test support under 0.8300 however and we are looking to the BOE rate announcement this week for further information about the UK monetary policy outlook as well as the ECB meeting for its counter. Looking ahead, BRC Retail Sales previously at 2.2%.

Australian Dollar (AUD) the AUD/USD rallied with US stocks as the traditional risk asset still outperformed after the US jobs numbers. The RBA meets on Tuesday and are expected to cut rates as the Australian economy slows down. The recent jobs and inflation data has been soft and this has left the door open for another 0.25% rate cut. AUD/JPY is the strongest pair in the market benefiting from the USD/JPY and AUD/USD upside on Friday.

Oil & Gold (XAU) Gold corrected overnight as the safe haven precious metal lost some of its relative shine to the USD. OIL/USD attempted a meek rally to $97.50 after the good US data Friday.

Pairs to watch

EUR/USD all eyes on Greece for next direction

OIL/USD to attempt rally after last week’s selloff?

TECHNICAL COMMENTARY

Euro – 1.3085

Initial support at 1.3000 (Big Figure Support) followed by 1.2931 (Jan25 low). Initial resistance is now located at 1.3244 (38.2% retrace of 1.4247-1.2624) followed by 1.3386 (Dec 12 high)

Yen – 76.80

Initial support is located at 76.00 (big figure) followed by 75.35 (Big Figure). Initial resistance is now at 77.49 (Jan 27) followed by 77.82 (Jan 26 high).

Pound – 1.5775

Initial support at 1.5642 (Jan 27 low) followed by 1.5517 (Jan 23 low). Initial resistance is now at 1.5889 (Nov 18 high) followed by 1.5932 (Nov 15 high).

Australian Dollar – 1.0720

Initial support at 1.0573 (Jan 23 high) followed by the 1.0428 (Jan 4 low). Initial resistance is now at 1.0765 (Sept 1 high) followed by 1.1007 (Aug 2 high).

Gold – 1735

Initial support at 1732 (Feb 1 low) followed by 1681 (Jan 23 high). Initial resistance is now at 1763 (Dec 2 high) followed by 1790 (former trendline support drawn off Oct 20 low).

Oil – 97.30

Initial support at 96.00 (Intraday Support) followed by 95.00 (Intraday Support). Initial resistance is now at 98.50 (Intraday resistance) followed by 100.00 (Intraday Resistance).

Written by Anthony Darvall

Written by Easy-Forex

Daily Outlook – US Jobs Impress, Judgment Day for Greece is an article from: