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Forex: US Dollar May Extend Gains on Pro-Taper Fed, G20 Commentary

Forex: US Dollar May Extend Gains on Pro-Taper Fed, G20 Commentary

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Japanese Yen Sold as Asian Stocks Follow Wall Street Higher
  • G20 Draft Communiqué Shows Support for Stimulus Withdrawal
  • US Dollar May Rise as Fed’s Fisher Talks Up “Tapering” QE

The Japanese Yen underperformed in overnight trade, falling as much as 0.3 percent on average against its leading counterparts, as a recovery across Asian stock exchanges sapped demand for the safe-haven currency. The MSCI Asia Pacific regional benchmark equity index rose 1 percent, seemingly taking its cues from a rebound on Wall Street.

Looking ahead, a quiet economic calendar in European and US trading hours puts the spotlight on the “Fed-speak” calendar, with comments from FOMC policymaker Richard Fisher in focus. The usually hawkish Dallas Fed President is likely to add his voice to the already single-minded chorus of central bank officials arguing in favor of continued “tapering” of QE asset purchases.

Rhetoric supportive of stimulus reduction will follow the firm tone noted in minutes from January’s FOMC policy meeting published earlier this week and a six-month high on headline CPI inflation revealed yesterday. A draft communiqué from the weekend’s sit-down of G20 finance ministers and central bank leaders likewise supported backed the withdrawal of monetary stimulus.

As we discussed in detail earlier in the week, news-flow supportive of QEcutback continuity stands to aid the nascent recovery in the US Dollar. The benchmark currency has now secured four consecutive sessions in positive territory and is now working on the fifth, which would amount to the longest back-to-back rally since late October 2013.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

23:50

JPY

Bank of Japan Jan 21-22 Meeting Minutes

-

-

-

European Session

GMT

CCY

EVENT

ACT

EXP

PREV

-

-

G20 FinMins, CB Governors Meet in Sydney

-

-

High

8:00

CHF

Money Supply M3 (YoY) (JAN)

-8.0B

12.1B

Medium

9:30

GBP

PSNB ex Interventions (JAN)

-9.1B

10.4B

Low

9:30

GBP

Public Sector Net Borrowing (£) (JAN)

-31.0B

9.0B

Low

9:30

GBP

Public Finances (PSNCR) (£) (JAN)

-1.2%

2.8%

Low

9:30

GBP

Retail Sales ex Auto (MoM) (JAN)

5.0%

6.1%

Medium

9:30

GBP

Retail Sales ex Auto (YoY) (JAN)

-1.0%

2.6%

Medium

9:30

GBP

Retail Sales incl. Auto (MoM) (JAN)

5.0%

5.3%

Low

9:30

GBP

Retail Sales incl. Auto (YoY) (JAN)

-8.0B

12.1B

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.3569

1.3646

1.3682

1.3723

1.3759

1.3800

1.3877

GBP/USD

1.6511

1.6585

1.6618

1.6659

1.6692

1.6733

1.6807

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

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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