Dow Jones News Mon 14th Feb 2011

Fxpro Intraday snapshot

EUR/USD

The corrective recovery off Friday's low at 1.3497 is only a temporary reprieve and bears are expected gather for a fresh attack on 1.3497. With solid resistance lying in the 1.3575 area, the short-term bear trend is expected to intensify and a break below 1.3497 would expose 1.3453 and a downwave equality target at 1.3391. Solid support lies at 1.3360. A sustained break above 1.3575 would defer the bearish outlook, but corrective upside risk is limited to the 1.3620 area.

  

GBP/USD

The corrective rally off 1.5964 is not expected to last and a return to 1.5964 is likely while 1.6137 caps. Friday's weakness turned the Feb. 3 peak at 1.6277 into a potential short-term bull failure and the current threat is for further weakness below 1.5964 to expose 1.5855 and 1.5826. However, only below the Jan. 25 reaction low at 1.5752 would confirm the bull failure. Only a recovery above 1.6137 would leave 1.5964 stranded, opening 1.6185.

USD/JPY

The solid 83.68/83.79 resistance cluster is behind the setback off Friday's one-month high and support at 83.10 is being challenged. The three-month bear pennant continuation pattern continues to dominate the daily chart and a break below 83.10 would expose 82.85 and key support at 82.50. In order to re-open the 83.68 high, a break through 83.40 is required, but the 83.68 high looks secure for Monday's session.

AUD/USD

The recovery off Friday's low at 0.9960 is looking to extend toward fortified resistance at 1.0100. However, a fresh wave of bull pressure would be required to force a break through 1.0100 and re-open the Feb. 4 reaction high at 1.0201. While 1.0100 caps, there is downside risk back to 0.9981 and the 0.9960 low.

Fxpro Focus

The global economy may be getting just too much adrenalin from China. And the result looks increasingly like a nasty dose of inflation. The problem is that Chinese growth, and its impact on world commodity prices, is proving stronger than anticipated at the same time that global food prices are undergoing an unexpected, and probably sustainable, rise. In many ways, trade data from China Monday showing that the country's surplus with the rest of the world had fallen to a nine-month low of $6.5 billion in January was good news. It will certainly help to ease tensions between Beijing and those countries demanding that China accelerate its appreciation of the yuan. With imports growing by nearly 38% and exports rising by 51% there is plenty of evidence that both Chinese and global demand are proving stronger than expected. Of course, the figures could have been distorted by the Chinese New Year holidays last week but the increases, along with recent strong manufacturing data in both China and the U.S., suggest that China remains, and is likely to remain, a strong engine of the global upturn. But within these figures also lurks a problem: the higher prices China is paying for its commodity imports. Take copper. According to Capital Economics, the volume of scrap and unwrought imported copper was 16% above last January's level but 51% higher in terms of price paid in dollars. This may bode well for the commodity exporters of countries such as Australia but it isn't good news for global inflation pressures in the future.

Europe

The euro fell sharply across the board in London trading Monday, sinking to a fresh three-week low against the dollar as worries about German bank WestLB added to renewed euro-area sovereign concerns. Th euro climbed steadily in Asia Monday, buoyed by the weekend's events in Egypt where President Hosni Mubarak finally stood down and Chinese trade data which showed a surged in imports. However, shortly after European trade got underway, the single currency plunged some 0.4% against the greenback to trade at $1.3453, after headlines suggested that WestLB's future was in doubt. Sources close to the situation told Dow Jones Newswires Sunday that the troubled lender could be preparing to outline a government-supported restructuring plan before the European Commission's deadline Tuesday, setting the groundwork for breaking up the bank. "Concerns about WestLB added to increasing doubts about EU officials' ability to reach an agreement to bolster the European Fiscal Stability Facility before April and that's hurting the euro," said Jane Foley, a currency analyst at Rabobank in London. The currency was also facing pressure ahead of the meeting of Eurogroup finance ministers Monday afternoon, but while the meeting will be watched with interest, no new developments are expected before the meeting of euro-zone leaders at the end of March.

Asia

The dollar fell against the yen Monday in Asia as the greenback's ascent Friday to a one-month high lured aggressive selling by Japanese exporters keen to settle accounts. Still, not many Tokyo dealers believe the U.S. currency will keep falling. They expect bargain-hunting to soon kick in as many speculators have a long-term bullish view toward the world's largest economy. During Asian trading, Japanese exporters were among the main active players, pushing the dollar to as low as Y83.14 from Y83.57 at the start of the session. With the dollar above Y83.50 for the first time since Jan. 11, "it was an attractive price for exporters who must settle their accounts toward the fiscal year end of March 31," said Tsutomu Soma, a senior dealer at Okasan Securities. "Exporters came back from Japan's three-day weekend and saw the dollar above Y83.50. It was a chance they couldn't miss," Soma said. As of 0450 GMT, the dollar was at Y83.20 from Y83.40 Friday in New York. Tokyo dealers said it may keep falling over the global day, but not below Y82.80.

World

The euro slipped against the dollar Friday, as initial relief over Egyptian President Hosni Mubarak's resignation gave way to further questions about potential ripple effects in the Middle East and a renewed focus on the euro-zone's sovereign debt woes. The dollar was broadly buoyed by encouraging U.S. data and some safe-harbor buying on uncertainty about Egypt. Fewer than 24 hours after defying domestic and international pressure to step down, Mubarak finally gave in to nearly three weeks of demonstrators protesting his three-decade autocratic rule. In theory, the departure of Mubarak should have led to unwinding of safe-haven buying that has buttressed the dollar. Instead, it provided an excuse for investors to look more closely at the woes that continue to bedevil the euro zone, which has yet to resolve the sovereign debt crisis. "Still percolating underneath it all is the concern that all things are not good in the periphery," of the euro zone, said Alan Ruskin, global head of G10 foreign exchange strategy at Deutsche Bank in New York. After bouncing up to around $1.3570 in the wake of Mubarak's resignation, the euro fell to new session lows below $1.3500.