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FOREX: Dollar Gains Ahead of US GDP Report, Yen Rebounds on Jobs Data

FOREX: Dollar Gains Ahead of US GDP Report, Yen Rebounds on Jobs Data

2011-01-28 06:46:00
Ilya Spivak, Sr. Currency Strategist
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Key Overnight Developments

  • Japanese Yen Outperforms as Jobless Rate Unexpectedly Declines
  • US Dollar Gains as Traders Prepare for Fourth-Quarter GDP Report

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3642

1.3761

GBPUSD

1.5811

1.5964

The Euro and the British Pound declined, sliding as much as 0.4 and 0.5 percent against the US Dollar as the greenback traded higher against most of top counterparts – with the notable exception of the Yen – ahead of the upcoming fourth-quarter US GDP report (see below).

Asia Session Highlights

CCY

GMT

EVENT

ACT

EXP

PREV

JPY

23:30

Job-To-Applicant Ratio (DEC)

0.57

0.58

0.57

JPY

23:30

Household Spending (YoY) (DEC)

-3.3%

-0.6%

-0.4%

JPY

23:30

Jobless Rate (DEC)

4.9%

5.1%

5.1%

JPY

23:30

Tokyo Consumer Price Index (YoY) (JAN)

-0.1%

-0.2%

-0.1% (R+)

JPY

23:30

Tokyo CPI Ex-Fresh Food (YoY) (JAN)

-0.2%

-0.3%

-0.4%

JPY

23:30

Tokyo CPI Ex Food, Energy (YoY) (JAN)

-0.3%

-0.5%

-0.5%

JPY

23:30

National Consumer Price Index (YoY) (DEC)

0.0%

-0.1%

0.1%

JPY

23:30

National CPI Ex-Fresh Food (YoY) (DEC)

-0.4%

-0.5%

-0.5%

JPY

23:30

National CPI Ex Food, Energy (YoY) (DEC)

-0.7%

-0.8%

-0.9%

JPY

23:50

Retail Trade s.a. (MoM) (DEC)

-4.1%

-1.4%

2.1% (R+)

JPY

23:50

Retail Trade (YoY) (DEC)

-2.0%

0.6%

1.5% (R+)

JPY

23:50

Large Retailers' Sales (DEC)

-1.8%

-0.5%

0.1% (R-)

GBP

0:01

GfK Consumer Confidence Survey (JAN)

-29

-

-21

CNY

1:35

MNI Business Condition Survey (JAN)

61.11

-

62.08

The Japanese Yen outperformed in Asian trade – rising as much as 0.4 percent on average against the major currencies – after the Jobless Rate unexpectedly fell to a ten-month low at 4.9 percent while the nation-wide Consumer Price Index reading printed flat, showing the economy posted positive inflation for the first in eight quarters in the three months through December. Profit-taking likely added to upward momentum as traders unwound some of their short-Yen exposure in the aftermath of yesterday’s sharp drop on the back of Japan’s surprise credit rating downgrade at S&P.

The remainder Japan’s data docket proved disappointing as overall Household Spending tumbled 3.3 percent, the most in 22 months, while Retail Trade fell 4.1 percent to mark the largest monthly decline on record. Traders seemed to look past the outcomes however, with the hope being that domestic demand will find stability as a pickup in exports continues to stoke employment and – by extension – incomes and consumption.

Euro Session: What to Expect

CCY

GMT

EVENT

EXP

PREV

IMPACT

EUR

9:00

Euro-Zone M3 s.a. (YoY) (DEC)

1.9%

1.9%

Low

EUR

9:00

Euro-Zone M3 s.a. (3M) (DEC)

1.6%

1.3%

Low

EUR

9:00

Italian Hourly Wages (MoM) (DEC)

0.2%

0.2%

Low

EUR

9:00

Italian Hourly Wages (YoY) (DEC)

1.7%

1.7%

Low

EUR

10:00

Italian Consumer Confidence Index s.a. (JAN)

108.9

109.1

Low

CHF

10:30

KOF Swiss Leading Indicator (JAN)

2.05

2.1

Medium

A lackluster European calendar is likely to see traders looking ahead to US Gross Domestic Product figures on tap later in the session, with output in the world’s top economy expected to grow at an annualized pace of 3.5 percent in the three months through December, the fastest in three quarters. Furthermore, the acceleration is forecast to come on the back of a surge in private spending, with consumption seen adding 4 percent to mark the largest gain in four years.

Short-term correlation studies suggest the greenback has largely unwound its inverse correlation with underlying risk appetite (as tracked by the MSCI World Stock Index) while carving out an increasingly significant link with US treasury yields, suggesting a robust outcome stands to boost the currency against its major counterparts. The extent to which the relatively dovish shift in the FOMC voting dynamic earlier this week contains upward pressure on the US currency remains to be seen however.

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