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At 3:50 AM German Feb unemployment (9.6%, prev 9.6%) At 6:00 AM German Jan industrial orders m/m (exp -1.4%, prev 4.2%) German Jan industrial orders y/y (exp -3.0%, prev -5.4%) At 7:00 AM Bank of England MPC (exp 4.0%, prev 4.0%) At 7:45 AM European Central Bank monetary policy meeting (exp 3.25%, prev 3.25%)
JPY slipped as low as 132.45 against the dollar 115.30 against the euro in Tokyo trade after Moody's reiterated there was a significantly high probability a current review will lead to a two-notch cut in Japan's rating. Moody's put Japan on review in mid-February and at the time warned that a two-notch cut in the present Aaa3 rating was a risk. However, the decision was not imminent Moody's said. Unconfirmed talk that a Japan's state pension fund may be planning to start a huge foreign bond investment plan also kept USD/JPY from slipping below the key 131.80 support.
Were USD/JPY to break key support at 132.00/131.80 it would have a bearish implication for the pair and would open up a downside target of 130.45. But the recent sell off may have bottomed again at the 131.80 mark, where stop loss orders are being protected. Upside capped at 132.50, 133.50 and 133.70, 134.00/10, 134.70/85 and strong resistance at 135.15. Support holds at 132.00 and 131.80.
Meanwhile, both the euro and sterling traded near session highs against the dollar today ahead of their respective monetary policy meetings later in the day. Improving economic data and benign inflationary pressures are seen allowing the ECB and BoE to keep rates unchanged at 3.25% and 4.0%. In fact, financial markets are already pricing in a quarter percentage point ECB rate rise by June and BoE Governor George last week had to verbally intervene in the interest rate market to convince futures traders to lower expectations of rate hikes later this year. The German DIW institute head also doesn't expect more ECB rate cuts in this cycle, saying the next move is up instead of down.
EUR/USD hovered around the 87-cent mark but did not show a clear trend for traders. Dealers say only a sustained break above 87.30 or below 86.30 would give a better direction and until then, many are on the sidelines. Holding above 87-cents and taking out 87.35 resistance is now critical for the euro. Failure to maintain above 87 cents could initiate a fall back towards last week's 3-week low of 86.25. A move through 86.30/15 would target its 6-month low of 85.63. But technical indicators are mixed. Support is seen at 86.60, 86.30, 86.15, and 85.60. Resistance is viewed at 87.30, and 87.85.
Cable is trading around $1.4230 after shedding over one-third cents as traders reacted to UK Prime Minister Blair's remarks that sterling's exchange rate posed a problem for euro membership. Blair expounded that the government had not yet decided on the timing of a euro referendum, in contrast with previous speculation that the process would be speeded up. Upside capped at 1.4250, 1.4280 and 1.430. Support holds at 1.4220, 1.4170/80, 1.4130 and 1.410.
USD/CHF is trading at around $1.6970 as markets wait for Thursday's Swiss Q4 GDP figures for more clues about the Swiss National Bank's next likely monetary policy decision on March 21, although no rate change is expected. A survey projected that Q4 GDP would fall to 0.35% or even as low as -1.5% from the previous quarter's 0.8%, highlighting the weakness in the Swiss economy. Support is seen at 1.6900, backed by the 200-day moving average of 1.6856 and the 1.680-franc figure. Upside capped at 1.7060, 1.710 and 1.7140.
Today's speech by Greenspan on monetary policy and Friday's key US labor market report will also keep dollar bulls anxiously awaiting further signs of recovery which may pull the greenback out of rangebound trading. But the dollar's recent failure to benefit from strong data and Wall Street's gains has left bulls feeling uncertain. Therefore, currencies continue to trade familiar ranges with trends hard to find.