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FOREX: Dollar on the Defensive But Selling Pressure Unlikely to Last

FOREX: Dollar on the Defensive But Selling Pressure Unlikely to Last

2012-01-31 08:39:00
Ilya Spivak, Head Strategist, APAC
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Talking Points

  • US Dollar Corrects Lower as Asian Stocks Rise on Japanese, Australian Data
  • Stock Index Futures Point to Upswing in Risk Appetite But Optimism is Suspect
  • German Jobs Report Unlikely to be Market-Moving as Familiar Trends Hold

The US Dollar pulled back in overnight trade after a strong showing over the preceding 24 hours that saw the greenback rise 0.3 percent on average against its leading counterparts as Asian stocks rose, weighing on safe-haven demand. The MSCI Asia Pacific regional benchmark index added 0.4 percent after Japan’s Manufacturing PMI rose to show sector growth accelerated for a second month in January while Industrial Production topped expectations to add 4 percent in December, marking the largest increase in 7 months. A gauge of Australian Business Confidence from NAB also improved, hitting the highest level since May. The data set tempered fears that a slowdown in Europe will dampen export demand and hurt growth prospects across Asia.

Looking ahead, stock index futures tracking key European and US exchanges are pointing higher to suggest risk appetite remains well-supported and arguing for continued losses for the safe-haven US currency. Optimism’s durability appears suspect however. Indeed, yesterday’s highly anticipated EU leaders’ summitproved disappointing on its most important objective – defusing the near-term threat of a disorderly sovereign default unleashing another worldwide credit crunch – as policymakers put off finalizing the permanent ESM bailout fund and failed to secure agreement on private-sector involvement (PSI) in the second Greek bailout needed to secure near-term funding for the debt-strapped nation. Some knee-jerk buoyancy is perhaps to be expected considering EU officials did inch a bit closer toward the longer-term objective of institutionalizing budgetary restraint within the currency bloc, but the pick-up in sentiment seems highly vulnerable to reversal.

On the data front, German Unemployment figures headline the European calendar, with expectations calling for the economy to add 10,000 jobs in January. The unemployment rate is forecast to remain unchanged at 6.8 percent, a record low. While such an outcome certainly does not amount to negative news, it likewise offers nothing particularly new that has not had ample opportunity to be priced long ago. Indeed, the German labor market has been steadily improving since the second half of 2009, so barring a wild deviation from expectations it seems unlikely that another small step in the same direction is going to prove particularly market-moving.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

21:45

NZD

Building Permits (MoM) (DEC)

2.1%

8.0%

-6.2% (R+)

23:15

JPY

Markit/JMMA Manufacturing PMI (JAN)

50.7

-

50.2

23:30

JPY

Household Spending (YoY) (DEC)

0.5%

-0.1%

-3.2%

23:30

JPY

Jobless Rate (DEC)

4.6%

4.5%

4.5%

23:30

JPY

Job-To-Applicant Ratio (DEC)

0.71

0.70

0.69

23:30

AUD

RPData-Rismark House Px Raw (DEC)

-1.2%

-

0.0% (R+)

23:30

AUD

RPData-Rismark House Px s.a. (DEC)

-0.2%

-

0.4% (R+)

23:50

JPY

Industrial Production (YoY) (DEC P)

-4.1%

-5.0%

-4.2%

23:50

JPY

Industrial Production (MoM) (DEC P)

4.0%

3.0%

-2.7%

23:50

JPY

Loans & Discounts Corp (YoY) (DEC)

0.0%

-

-0.4%

0:01

GBP

GfK Consumer Confidence Survey (JAN)

-29

-32

-33

0:30

AUD

NAB Business Confidence (DEC)

3

-

2

0:30

AUD

NAB Business Conditions (DEC)

1

-

1

0:30

AUD

Private Sector Credit (MoM) (DEC)

0.3%

0.3%

0.3%

0:30

AUD

Private Sector Credit (YoY) (DEC)

3.5%

3.6%

3.6% (R+)

2:00

NZD

Money Supply M3 (YoY) (DEC)

6.0%

-

6.5%

4:00

JPY

Vehicle Production (YoY) (DEC)

13.4%

-

4.5%

5:00

JPY

Annualized Housing Starts (DEC)

0.783

0.848M

0.845%

5:00

JPY

Housing Starts (YoY) (DEC)

-7.3%

-1.5%

-0.3%

5:00

JPY

Construction Orders (YoY) (DEC)

1.5%

-

21.0%

5:00

JPY

Small Business Confidence (JAN)

45.7

-

45.6

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:00

EUR

German Retail Sales (YoY) (DEC)

0.9%

0.8%

Medium

7:00

EUR

German Retail Sales (MoM) (DEC)

0.8%

-1.0%

Medium

7:00

CHF

UBS Consumption Indicator (DEC)

-

0.81

Low

8:55

EUR

German Unemployment Change (JAN)

-10K

-22K

High

8:55

EUR

German Unemployment Rate s.a. (JAN)

6.8%

6.8%

Medium

9:00

EUR

Italian Unemployment Rate s.a. (DEC P)

8.7%

8.6%

Low

9:00

EUR

Euro-Zone Services Confidence (JAN)

-1.6

-2.1

Low

9:30

GBP

Mortgage Approvals (DEC)

54.0K

52.9K

Medium

9:30

GBP

Net Consumer Credit (DEC)

0.4B

0.4B

Low

9:30

GBP

Net Lending Sec. on Dwellings (DEC)

0.8B

0.6B

Low

9:30

GBP

M4 Ex OFCs 3M Annualised (DEC)

-

3.7%

Low

9:30

GBP

M4 Money Supply (MoM) (DEC)

-

0.6%

Low

9:30

GBP

M4 Money Supply (YoY) (DEC)

-

-2.6%

Low

10:00

EUR

Euro-Zone Unemployment Rate (DEC)

10.4%

10.3%

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3069

1.3309

GBPUSD

1.5663

1.5786

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow me on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com

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