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At 8:30:00 AM US February Retail Sales (exp 0.9%, prev -0.2%) US February Retail Sales Ex-Autos (exp 0.5%, prev 1.2%) At 1:35 PM Fed Chairman Greenspan gives speech.
The dollar rose to a one-week high of 129.63 yen and again broke through trendline resistance at $1.4115 against the pound in London, but trade in EUR/USD was subdued ahead of key retail sales data from the US at 8:30 AM. This morning's retail sales data will help economists improve estimates of first quarter GDP after the surprising revision in US Q4 GDP from 0.2% to 1.4% put confidence back on Wall Street.
Today's U.S. retail sales figures are expected to show continued strength and the consensus estimate has recently been revised up to 0.9% from 0.3% last week. Moreover, traders said rumors were rife that it could be even stronger.
Meanwhile Fed Chairman Greenspan might use today's speech to the Independent Community Bankers of America convention in Honolulu to further talk up the economy. Dealers say this should be the last time we hear from the Fed before the March 19 policy meeting. Moreover, Greenspan will be speaking for himself and not the FOMC as a group when he sounded a cautiously upbeat note for the US economy.
The dollar continued its recovery to a high of 129.63 yen on Wednesday after finding support at 127.75 on Monday, which marks the 38.2% retracement of the 115.75-135.15 move. Two consecutive days of gains came after back to back losses on the Nikkei undermined recent yen strength and took profit from the Nikkei's 5% rally last week. Therefore, doubts still remain as to whether the Nikkei can maintain recent gains after the March 31 fiscal year end and whether the spectacular rise in yen on speculative trading will come undone over the next few weeks. BoJ Governor Hayami reiterated today that he expected the market to be stable through the end of March, but he did not say what could happen afterwards.
This was also the fourth session in a row that a Japanese official had cautioned the market over the dollar's fall, indicating that the yen's sharp rise last week was problematic for the Ministry of Finance, which prefers a stable currency. Economics Minister Takenaka on Tuesday reiterated that the yen's recent rise was too rapid and his comments were expected to keep speculators at bay. This followed Zembei Mizoguchi, head of the finance ministry's international bureau, who warned on Monday and today that the authorities were prepared to take intervene in the markets if necessary.
USD/JPY tested resistance at 129.65 which marks the 38.2% retracement of the 134.95-126.32 move. Failure to break back above that level could entice speculators to short USD/JPY again and target 125.28, the 50% retracement of the 115.75-135.15 move. Follow up resistance is seen at 130.65 and 131.65, which mark the 50%, and 61.8% retracements of the move from 134.95 to 126.32.
Sterling came under pressure across the board today as EUR/GBP rose above 62 pence for the first time in 4 weeks. This pressured GBP/USD back below key trendline support at 1.4115 and to a session low of 1.4100. GBP/USD is looking to break its current symmetrical triangle pattern in development since June 2001. Trendline support stands at 1.4115 and a confirmed breakout is often followed by a more powerful move lower. Moreover, cable also broke below 1.4118 which marks the 61.8% Fib retracement of the move from 1.3680-1.4827.
On Tuesday sterling came under renewed pressure after the NIESR said that UK GDP is anticipated to rise 0.1% in the 3 months to February compared with the previous period, thereby suggesting a stagnant economy. Traders also observed that the pound came under further selling pressure on news that Amersham Plc planned to purchase Pharmacia Corp's share of their Amersham Biosciences joint venture for 704 million pounds. Therefore, both patterns and fundamentals suggest further sterling weakness over the near-term with upside limited at 1.4180 and 1.4225.
Meanwhile, EUR/USD hovered in a tight 87.35-87.60 range today, after yesterday's bounce from 87 cents signaled the market was not yet ready to sell EUR/USD below that level. Resistance at 87.60, which marks the 61.8% retracement of the bull move from 86.29 to 88.39, has proved tough to break this week. But support at 87.35, which marks the 50% retracement of the same move, is currently holding. More importantly, the pair needs to remain above 87.10/00, because a break of that key support would damage the bullish sentiment and force many dealers to call 88.39 the high and look for possible new lows below 86.29. Resistance seen at 87.60 followed by 88.40.
USD/CHF fell sharply from a day's high of 1.6817 to a low of 1.6768 but maintained above support at 1.6780 which is the 50% retracement of the rise from the year's low of 1.6356 to the year's high of 1.7222. However, Swissy has had trouble rising back above its 200-day moving average of 1.6825 after it slipped below this average last week. Next target seen at 1.6935-40. Support seen at 1.67, backed by 1.6680--the 61.8% retracement of the aforementioned move. Upside faces initial pressure at 1.6840 followed by 1.6885-the 38% retracement of the move.
On March 21 the Swiss National Bank is expected to keep rates unchanged, thereby limiting the downside pressure to the franc. Recent commentaries by SNB board members indicate that the high level of the CHF is a concern, but by itself not sufficient to affect the FX rate.