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At 2:45:00 AM France Q4 GDP y/y prel (exp 1.1%, prev 2%) France Q4 GDP q/q prel (exp 0%, prev 0.5%) At 6:00:00 AM US Dec Current Account (ECB) (exp n/a, prev 2.8 bln) E-12 Dec Trade Balance, 1st est. (exp 5.7 bln, prev 5.5 bln)
The dollar kept pressure on the European majors and held near the 134-yen mark in quiet Tokyo trade. With no economic news from the US today, traders will look to French GDP figures at 2:45 AM and the Belgium BNB economic survey later in the day. But the main focus will be on Wall Street after another late session selloff held back dollar gains.
EUR/USD fell to a session low of 86.86 but has failed to target support at 86.60/50.
Dealers warn that action is becoming increasingly volatile and directionless, and movement is seen tracking Wall Street carefully. Therefore, EUR/USD could stage another recovery given Japan's economic woes and Wall Street's accounting concerns. While some traders expect a pullback towards 86.50, others see the possibility of a run towards 87.50 88.00, 88.60 and even 88.80. But if the pair was to fail breaking the last resistance zone, it could resume its downtrend from there. This reflects the view that US equity losses are also a temporary phenomenon and that a rise in the euro is not a reflection of its own strength.
GBP/USD fell to a day's low of 1.4247, just above key support at 1.4235. Sterling also hovered in a tight range around 61 pence. Cable support stands at 1.4235, 1.4200 and 1.4150. Upside capped at 1.4340, 1.4365 and 1.440. Sterling remains weak after back to back surprise declines in UK retail sales worried dealers. PM Blair has also stepped up the EMU propaganda machine, which can weigh on the pound. Moreover, fears of pension reform that could divert asset away from UK investments, and a possible tax hike to pay for health care reform are two other factors weighing on sterling.
USD/JPY maintained above the 134 mark after briefly dipping below that level from Japanese exporter selling around 134.05. Also weighing on JPY was Japan vice economics minister Kobayashi who confirmed that cabinet officials agreed that there was no need for an injection of public money into the troubled banking sector at this time. Markets grew weary with Japanese rhetoric officials shied away on the injection of public funds into the troubled banking sector after having given a number of assurances to shore up the financial system and tackle deflation. Resistance is seen at 133.70, 134.00 and 134.50. Support is seen at 133.90, 133.40, 133.00, 132.65 and 132.35.
Today's 0104 GDP figure from France will interest markets after a surprise 0.4% fall in French consumer spending in January, which sent the yearly rate to 1.2% from 3.8% and pushed the euro to an overnight low of 86.84. Euro area Q4 GDP was supposed to be weak and French growth is expected flat in the quarter. However, the Belgium BNB survey likely showed another gain in January as further improvements in the inventory situation helped businesses.