The Dollar and the Yen still remain in strong positions
The euro moved lower against the US dollar on Friday as the single currency tested bids around the 1.2765 level. The US dollar’s rise continued pushing common currency reached its lowest level since December. Data released in the Eurozone saw the January EMU-15 PMI services index improving to 42.5 from 42.1 in December, above estimates but still at a contractionary level. Moreover, it is too soon to know if the eurozone services sector has reached the bottom. These data heightened the chances the European Central Bank will cut interest rates again in March. The yen appreciated vs. the US dollar as the greenback tested offers around the ¥89.60 level. Bank of Japan reported financial conditions have become tighter even with the overnight call rate near zero per cent. Data released in Japan overnight saw the November all-industries index off 2.3% m/m. The euro moved lower vs. the yen as the single currency tested bids around the ¥112.50 level. The British pound also came off against the yen as sterling tested bids around the ¥118.85 level. The British pound extended and recent losses vs. the US dollar as reached levels around the 1.3500. Cable continued to weak as official data confirmed the U.K. economy contracted at its fastest pace in nearly three decades. The economy contracted 1.5% in Q4 2008, the largest decline since 1980. Bank of England will likely be forced to cut interest rates further in the next months, possibly even to 0%.
EUR/USD
The short term picture remains neutral as the euro consolidates near the level at 1.2850, which continues to show support. If 1.2850 is broken successfully next targets will be the supports at 1.2550 and 1.2400. On the upside, resistance is seen at 1.3110, which is 38.2% retracement of the 0.8375-1.6035 rise, followed by 1.3340 and 1.3750, which is 38.2% retracement of the 1.6035-1.2329 drop.
EUR/USD (chart, table)
USD/JPY
The short term picture remains natural as the pair keeps retreating from the psychological level at 90.00. So far the downward movement is limited by the support at 88.50, and if broken successfully next targets will be the supports at 87.10 and the psychological 85.00. On the upside, resistance is seen at 91.00, followed by 94.50 and 96.00, which is 38.2% retracement of the 110.64-87.14 drop.
USD/JPY (chart, table)
GBP/USD
The short term picture worsened as the pair reached the support at 1.3500. So far the downward movement is limited by this level, and if broken successfully next targets will be the supports at the psychological 1.3300 and 1.2550. On the upside, resistance is seen at 1.4365, followed by 1.4500 and 1.4830, where the 50-days SMA crosses.
GBP/USD (chart, table)
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26.01.2009 FX daily review.pdf, 601 Kb
