Forex - U.S drops ‘Bad Bank’ idea, while the Russian debt renegotiation allegation rattles risk sentiment – Euro declines.
Forex News and Events: FEBRUARY 10, 2009
The Euro declines against the dollar and the yen after Russian banks ask its government to mediate talks with foreign creditors on the issue of $400Bn – the market reads this as a tell tale sign the situation in Europe is worsening – meanwhile the U.S is finalizing a financial stimulus plan. Overnight the EURUSD traded from a high of 1.2902 to a low of 1.2810. A plethora of news saw the Euro drop and give away yesterday’s gains.
The USDJPY traded a range from a high of 91.67 to a low of 91.23 – the pair witnessed heightened volatility as risk sentiment drove the dollar lower on the news the “bad bank” idea had been scrapped. Further delays in the financial stimulus plan (which the Senate has managed to cap at $800Bn) don’t seem to be a problem for the Greenback’s continued advance as risk aversion remains central theme to the currency’s price action.
The main focus today is how the markets digest Treasury Secretary Geithner’s remarks and description of the revamped TARP – to be named the “Financial Stability Plan”. The plan, which so far won’t seek additional government money, is designed to support about $1.5 trillion in new lending and handling of distressed assets. The plan will also drop the “bad bank” proposal which consisted of buying all toxic assets from distressed institutions. It has three main components: more capital for banks, financing for as much as $1 trillion of consumer and business loans, and public financing for investors willing to buy the distressed assets. The announcement is due at 11:00 EST (16:00 CET).
The Risk Today:
EurUsd The Euro continues to feel the considerable pressure as recent decline shows that ephemeral Euro strength is unsustainable. The 1.2953, 50.00% retracement from yesterday’s 1.3095 – 1.2810 decline remains initial resistance, then 1.2973 if Euro holds strong and breaks current dollar domination. Focus on the downside sees initial support at 1.2878 and strong support at 1.2811 in the near term – A break through this level would see doors wide open for 1.2748 then 1.2707 (Feb 2nd low).
UsdJpy News developments during Early Asian session has seen the pair trade a very volatile 90.90 – 91.80 range, with the Yen extending gains from Sunday’s culmination at 92.39. Initial support sits at 90.74 (Feb 6th low). Further dollar weakness and risk aversion could see the yen fight back and regain 89.56 levels (Start of Feb 5th move) – this would be exacerbated by a dollar bull in the form of a solid economic stimulus plan to be announced could see a retest of 88.83. This decoupling (risk aversion) of the pair with regards to the usual dollar dynamic would see a dollar bear signal push the pair higher – initial resistance at 91.80, small target at 92.43 if impetus and news suffice to sustain overselling of the Yen.Today's Key Issues (time in GMT):
08:15 CHF Swiss CPI (MoM) -0.8% vs -0.4%
08:15 CHF Swiss CPI (YoY) 0.1% vs 0.6%
09:30 GBP Visible Trade balance -8’100 vs -8’330
09:30 GBP Total Trade balance -4’250 vs -4478
09:30 GBP Trade balance Non-Eu -4’800 vs -5304
15:00 USD Wholesale inventories (DEC) –0.7% vs -0.6%
15:00 USD Treasury Geithner Testifies on TARP at senate panel
18:00 USD Bernanke Testifies on Fed Programs at house panel
22:00 USD ABC Consumer Confidence (FEB8) -52 vs -52
23:30 AUD Westpac Consumer confidence (FEB)