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At 4:30:00 AM UK Feb Retail Sales m/m (exp 0.5%, prev -0.3%) UK Feb Retail Sales y/y (exp 4.7%, prev 4.2%)
The dollar was unchanged in Asian trade with holidays in Japan keeping markets subdued after the dollar's sharp sell off Wednesday morning. The greenback was also weighed by news that a car bomb near the US embassy in Lima exploded, killing seven people. The explosion came just three days before a visit by President Bush. But growing concern that US monetary policy would be tightened as early as May and large drop on Wall Street were the main culprits to the dollar's decline.
USD/JPY fell from overnight highs around 132.45 but remained well supported above 131.00. Overnight the dollar struggled to maintain above 131.80 yen and a break back above that level will be needed to avoid a further decline. A sustained fall below the 131.65/80 range would target retracements of the rally from 126.32 to 132.45: 38.2% at 130.10; 50% at 129.40; 61.8% at 128.65. Psychologically it is important for the dollar to remain above the 130 level. Therefore, a break below support at 130.10 would discourage the recent rally. Currently, the dollar has maintained above support at 131.20 but has encountered heavy selling around the 131.65/80 mark.
EUR/USD attempted to break its 200-day moving average at 88.62, but met with strong resistance around that level in Asian trade after failing to break the same mark overnight. 88.62 also marks trendline resistance which will make it particularly tough to crack. But as long as 88.40 support holds there is still a chance for another try at trendline resistance of 88.62. Follow up resistance is seen at 88.71 which marks the 61.8% retracement of the 90.63-85.63 move. If the euro fails to break these key levels today, an ensuing selloff could occur if dealers are disappointed with its price action. The last attempt by the euro to break out of this 6-month bear trend was in January when it rose to a high of 90.63. But that attempt failed and the euro encountered an ensuing selloff to this year's low of 85.63.
GBP/USD is in a similar technical pattern as the EUR/USD. Cable rose to an overnight high of 1.4313, just below key trendline resistance at 1.4320 after rebounding strongly from an overnight low of 1.4205. On Tuesday Cable briefly rose to a near 2-week high of 1.4301. The last time it tested trendline resistance sterling was at 1.4515 but was rejected and subsequently fell to a year's low of 1.4043, where it then rebounded. Therefore failure to overcome trendline resistance followed by its 200-day moving average of 1.4344 would have bearish implications for the pound. Support seen at 1.4200 and 1.4180.
Today at 10:00 AM the Swiss National Bank is expected to keep rates unchanged but this is not expected to have much impact on the franc. CHF has benefited across the board as safe-haven flows sparked by fears of US military action in Iraq added to recent gains. USD/CHF fell below support at 1.6580, and fell to a day's low of 1.6526, but Swissy remains safely above last week's lows around 1.6480 after ending a sharp five-franc retreat that week. Upside is seen capped at 1.6580, 1.6675 and 1.6747, the 38.2% retracement of the 1.7115-1.6517 move. Support is seen at 1.6520 and 1.6480