/www.fxserver.com/ At 8:55:00 AM US Weekly Redbook Store Sales (exp n/a, prev 0.7%) At 10:00:00 AM US January Challenger Layoffs (exp n/f, prev 92.9k) US December Factory Orders (exp 0.5%, prev -0.8%)
The dollar held to a tight range in London as traders were keen to focus on Secretary of State Colin Powell's address to the UN Security Council later today. Powell is expected to present compelling proof that Iraq is hiding weapons from UN arms inspectors which is seen raising the stakes for war. Notably, spot gold rose to a new 6-year high of $376.5 on war jitters and is up 9% in the past month. Given the recent bout of profit taking, the dollar could possibly benefit today if Powell's evidence would suffice in garnering enough support for the drafting of a second UN resolution, which in effect would pave the way to war with the backing of the Security Council.
US equity futures also deteriorated sharply overnight, helping weigh on European bourses this morning where the German DAX is down 3%. Monday's mixed bag of economic data kept Wall St gains to a bare minimum and with no key releases due today the markets are likely to key off of war fears. Oil prices held above $30 this morning as OPEC hinted there might be a 3 mln barrel per day glut if Venezuelan exports came back online, which could necessitate a cut in production by OPEC.
Economic data from the Eurozone showed flash January inflation falling in to 2.1% annually, just above the ECB's targeted 2% ceiling. November retail sales were not as bad as expected, falling 0.5% on the month and down 0.4% annually which reflected the dismal spending data seen out of Germany recently. Also showing signs of waning optimism was French January Consumer Confidence, which fell to a 5-year low of -22 from -17.0 last month, the worst since Feb 1998.
From the US the main release will be the December report on factory orders, expected to show a rise of 0.3% from a previous 0.7% decline. The report already includes a 0.2% rise in December durables. A positive figure is seen as a positive contribution to the preliminary (second release) Q4 GDP figures later this month, which could result into an upward revision from the initial figure of 0.7%.
EUR/USD rose to a session high of 1.0820, up one cent from overnight lows, where it rebounded off of 1.0695, its T/L support from its December 2 low at 98.60, which is now seen at 1.0720. But further gains ran into stiff resistance at 1.0820, just ahead of 1.0840 peaks. Failure to regain 1.0840 is likely to lead to more profit taking as momentum on a daily chart is now declining and its hourly momentum is running out of steam. Support is seen at 1.0755, 1.0720 and 1.0695. Above 1.0840 targets the 3-year high of 1.0907.
While gold reached a new 6 year high, USD/CHF failed to mark new lows as the dollar held over 1.5 centimes above last week's 4-year low of 1.3460. On Monday, USD/CHF rose to a session high of 1.3737 after breaking through a double top at 1.37 before giving back most of these gains. Nevertheless, the dollar has broken through a 2-month old trendline resistance and appears able to mark further upside potential from profit taking alone given the near record bearish sentiment in the dollar.
GBP/USD found support at 1.6350, the 38.2% of 1.6010-1.6570 and overcame initial resistance at 1.6440 to reach a session high of 1.6475. Further resistance is eyed at 1.65. Failure here could lead to a retest of overnight lows with interim support eyed at 1.64. But a move above 1.65 would likely target its 3-year peak of 1.6570. However, further gains may be held back around this level ahead of the intersection of trendline resistance from its November lows which proved to be a near term top last week.
USD/JPY fell back from an overnight 6-week high of 120.85, while EUR/JPY rose to yet another new 3 year high of 129.87. Market wariness over additional intervention attempts from government authorities is likely to support the dollar over the near term. Support eyed at T/L support of 120.00 and the previous peak at 119.40. Resistance stands at 120.60 -- the 38.2% retracement of the decline from 125.17 to 117.39. A breach above will find subsequent ceilings at 121 and 121.40 trendline resistance from 115.55 116.85.