www.forexnews.com // At 2:00:00 AM Germany Dec Manuf. Sales m/m (exp n/f, prev -3.8%) Germany Dec Manuf. Sales y/y (exp n/f, prev -10.7%) Germany Jan CPI y/y prel (exp 2.1%, prev 1.7%) Germany Jan HICP m/m prel (exp n/f, prev 0.1%) Germany Jan HICP y/y prel (exp n/f, prev 1.5%) Germany Jan CPI m/m prel (exp 0.9%, prev 0.1%) At 2:45:00 AM France Dec Unemployment (exp 9.1%, prev 9%) At 4:30:00 AM UK Jan Consumer Conf GFK (exp n/f, prev -1%) At 6:00:00 AM E-12 Nov Retail Sales m/m (exp 0.7%, prev n/a) E-12 Nov Retail Sales y/y (exp 0.6%, prev n/a)
The dollar held to overnight tight ranges ahead of more key data from the US today and Eurozone inflation data. On Wednesday, traders found plenty of reasons to sell the dollar as Wall Street gloom and strong dollar complaints prompted more profit taking ahead of today's key GDP data and FOMC meeting. But the dollar rebounded sharply after US Q4 GDP rose 0.2% q/q, beating estimates of a second consecutive negative quarter.
EUR/USD fell back to support at 86 cents after failing to hold onto gains above 86.30 overnight. The single currency will need to regain the 86.80 mark to really improve its outlook. If not, it still looks vulnerable to fall back below 86.00 on its way to this week's 6-month low of 85.72. A break below this would then target 85.55, the 71.8% Fibonacci retracement of the move from 82.25 to 95.95. Resistance is viewed at 86.80, and the key 87.40/50 level which marks the 61.8% Fibonacci retracement of the same move.
GBP/USD was able to avoid a sharp sell off due to sterling's gains against the euro. Cable maintained above key support at 1.4120 and is still one cent higher than its recent 6-month low of 1.4037. However, resistance at 1.4183, which marks the 38.2% Fibonacci retracement of the 1.4418-1.4038 move, has held so far. Barring a break of this resistance, renewed weakness could prevail. Support is seen at 1.4120 and 1.4080.
Today's data from Europe is expected to show a large rise in January inflation in Germany but continued consumer strength in the UK and Eurozone. The euro is likely to stay under pressure if German inflation comes in at 2.3% y/y, up from 1.7%. The rise is likely to be indicative of the overall rise in Eurozone inflation in January and will force the ECB to keep rate on hold at its next meeting on February 7.
Meanwhile, today's release of Chicago PMI is forecasted to rise to 45.5 in January from the previous 41.4, mirroring the improvement seen in the ISM (formerly NAPM) survey. The pickup in the manufacturing sector is attributable to increased spending on durables and other goods, and therefore, US Personal consumption is expected to rise to 0.1% in December from the previous 0.7%. Personal income is also assumed to post a gain of 0.3% in December from the previous 0.1%, even though the Employment cost index is projected to hold steady at 1.0% in Q4.
USD/JPY maintained support above 132.60 despite falling to a one-week low of 132.33 overnight. Dealers sold the dollar on concern that US manufacturers have again stepped up to persuade the U.S. Treasury that they don't want Japan intervening to push the yen down further. Although the Treasury has made it clear it is not backing down from a strong dollar policy, Sec O'Neill's comments last week showed concern over Japan just weakening the yen and not implementing structural reforms. The yen was also helped by overnight comments from Japan's MoF official Mizoguchi that he agreed with the BoJ's Hayami that a softer currency is not a solution to Japan's problems and that manipulating the yen lower would undermine Japan's credibility.
USD/CHF maintained above 1.7070 but the upside is still capped at 1.7160. Follow up resistance is seen at 1.720 and 1.7245-- the 61.8% Fibonacci retracement of last year's July high of 1.8221 to the September low of 1.5670. Support stands at 1.6955, 1.690 and 1.6860.