Last week’s calendar was packed with economic releases but the market was focused on Friday’s payroll number. For the first time in quite some time there were expectations of a positive number. These expectations were reinforced by comments of the Fed’s Bullard on Friday, stating that ‘we are close to a time when the unemployment rate will start falling and that a positive payroll number could be seen as soon as today’. While the November’s number was revised to a positive 4,000 form the negative 11,000 the December result was a dire -85,000. As a result the USD lost ground across the board as the market lost hopes for an interest rate rise anytime soon. Another factor supporting the Euro was the comment by ECB’s Stark that ‘the markets are deluding themselves if they think that other states will dip into their pockets to save Greece’.
In Japan, finance minister Fuji resigned, to be replaced by Deputy PM Kan who quickly stated his preference for a weaker JPY. Consequently JPY lost ground across the board. In another front, the Swiss National Bank surprisingly did not intervene in the FX market as the EURCHF traded in the 1.4700 which is a level not seen since the March intervention
The week ahead
The coming week brings some important data in the US. On Wednesday the Federal Budget is expected to decline to -85b from -120b. On Thursday, retail sales should fall to 0.4% from 1.3% and unemployment claims should rise modestly to 438k from 434k. On Friday, the CPI is expected lower at 0.2% from the previous 0.4%, while industrial production should remain at 0.8%. Consumer sentiment should rise to 73.7 from 72.5.
In the Eurozone, industrial production is expected to rise to 0.6% from -0.6% on Thursday. On the same day, the ECB is expected to keep rates steady at 1%. In the UK, manufacturing and industrial production should both rise to 0.3% from 0% on Wednesday.
Strategy
EURUSD
The break and close above 1.4450 shifts focus to the upside. The first target is 1.4670 and then 1.4780. However a daily close below 1.4450 will shift focus to the downside again
EURJPY
Any touch on the ascending trendline will be considered a buying opportunity. The first target is 135.30. A break of that will open the way to the 138.40 area
