News from Asia: No releases today but a few snippets from Japan though nothing really to inject fresh information. Fukui repeated his comments that the economy remains in a mild uptrend but currently slowing because of the country’s own housing problem. He still projects further growth once the slump is over. High oil prices are also causing problems which suck any spare spending cash from other goods. This was highlighted by economy minister Ota as beginning to impact on consumer sentiment. She forgot to mention the tax hikes… While Fukui & Ota maintain their bullish outlook, investors fail to agree with the Nikkei 225 struggling again today when it dipped through the 14,000 mark for the first time since November 2005. Certainly Dollar-Yen is looking more and more like following the Nikkei lower…
Other news:
The market has seen rumors spreading that Citibank will be announcing a sizeable write down from mortgage related investments. The WSJ is also reporting that it will announce a large cut in dividends and a large cash infusion.
The following economic releases are due today:
November
U.S. Business Inventories +0.4% December
French CPI (MoM) +0.3%
French CPI (YoY) +2.5%
Italian CPI (MoM) +0.3%
Italian CPI (YoY) +2.6%
U.K. CPI (MoM) +0.5%
U.K. CPI (YoY) +2.0%
U.K. CPI Core (YoY) +1.5%
U.K. RPI (MoM) +0.6%
U.K. RPI (YoY) +4.0%
U.S. PPI (MoM) +0.2%
U.S. PPI (YoY) +7.4%
U.S. PPI excl food & energy (MoM) +0.2%
U.S. PPI excl food & energy (YoY) +2.0%
U.S. Advance Retail Sales (MoM) +0.1%
U.S. Retail Sales less autos (MoM) +0.1% January
German ZEW Survey: Econ Sentiment - 40.0
German ZEW Survey: Current Situation +59.5
German ZEW Survey: Econ Sentiment - 38.0
U.S. Empire State Manufacturing 9.8
Ok, so we’ve seen breaks of Friday’s Dollar lows and this does have the feel of additional losses. Momentum still looks quite perky so I’m more inclined to look for additional Dollar losses. This leaves us with the next bigger question – how far can it go?
Well, I’ll take this step by step again. There is potential for this move to be quite strong but in order to avoid getting caught out should this be just part of a correction I’d suggest some caution at the old 1.4966 Euro high, at 1.0806 Swissie and against the Yen then watch support at 107.04. Until these areas break there is still risk of the decline stalling. Indeed, looking at the Pound I still expect a little more downside – but only to 1.9406-10. However, before seeing that move I still have a preference for the current correction moving a little more deeply higher. The perfect resistance there is at 1.9790-1.9854 – though that is quite a step up from yesterday’s 1.9647 high. One more point on JPY. I note the implications in Euro-Yen are becoming more and more bearish. The picture here almost seems to suggest quite a string decline. If this is correct then the 107.04 support may well easily cave in and if so this could see quite a solid follow-through which could reach sub 106… Take care there. One more final clue is to watch the momentum picture. As I mentioned, it is still pretty bearish Dollars right now but watch for any potential bullish divergence at key levels.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 108.80-16 1.4966-74 1.1003-38 1.9666-86
Res: 108.32-53 1.4880-13 1.0940-75 1.9602-31 Spt: 107.04-36 1.4810-20 1.0862-83 1.9520-50
Spt: 106.46-70 1.4630-60 1.0806-36 1.9406-18 | 
