Market Brief
The week starts with the anti-austerity Syriza’s victory in Greek general elections. Despite the historic outcome, Syriza will still need to agree a coalition to form a government. The Syriza government will now harden the austerity discussions with the EU, therefore the agreement for the next aid package by February 28th is at risk. At this point, we see little probability for a Grexit, while the negotiations will certainly take another turn. EUR/USD slightly gap-opened at 1.1189 (vs 1.1204 close on Friday), hit fresh low at 1.1098 and bounced back above 1.12 at the European open. Since last week, the EUR/USD took an almost 5-figure dive post-ECB / Greek elections. We believe that 1.10 should lend support given the deep oversold conditions (RSI at 17.5%, 30-day lower Bollinger band at 1.1249). Correction is certainly underway, yet the EUR sentiment being solidly negative, traders remain seller on rallies. Short-term resistances are placed at 100/ 200-hma area (1.1301/1.1442). EUR/GBP extended weakness to 0.74053 as Forbes suggested earlier BoE rate hike while expressing optimistic global growth outlook (?). Option barriers are placed at 0.78/0.79 and should weigh on the pair as GBP gains back strength.
GBP/USD holds ground at September-January downtrend channel base, with neutral technicals. Option barriers still sit at 1.51, the MACD will step in the bull zone for a daily close above 1.5082 and should signal short-term bullish reversal. The break below the trend baseline (1.4903) suggests extension to 1.4814 (July 9th, 2013 low).
In Japan, the trade deficit narrowed from 893.5 billion (revised) to 660.7 billion yen in December, mostly due to slide in energy prices. BoJ’s Kuroda said in Davos that despite EUR/JPY depreciation, the growth target remains anchored at 2% in 2015. JPY-crosses opened the week better bid. USD/JPY advanced to 118.20. Still in effort to clear resistance at daily Ichimoku top (118.24), trend and momentum indicators are now ready to step in the bullish zone, once the downside pressures on EUR/JPY cool-off. Daily close above 118.35 (Ichi baseline) should reinforce the appetite for lower JPY verse USD. Heavy pressures on EUR/JPY sent the pair to 130.15 at week open (lowest since June 2013).
AUD/USD extends weakness to 0.7855 before the 4Q CPI (due on Jan 28th). Softer inflation print should revive bets for a potential RBA cut. The short-term support is seen at 0.7824 (Oct-Jan downtrend base). Option barriers build solid above 80 cents. NZD/USD trends down to 0.7406 as the RBNZ is expected to keep the OCR unchanged at .3.50% yet to soften its hawkish bias at January 28th meeting. The bias is NZD-negative, next support is placed at 0.7335 (Fibonacci 61.8% on 2009-2011 lift).
Released on Friday, Canadian CPI falls 0.7% on month to December, more than expected. CPI y/y eases to 1.5% from 2.0% giving reason to BoC rate cut this week. USD/CAD advanced to 1.2460 and has more potential on the upside. We see support forming at 1.2205 (Fibonacci 76.4% level on 2009-2011 sell-off). The key mid-run technical resistance stands at 1.2734 (2005 high), then 1.3065 (2009 high).
Today traders watch: Spanish December PPI m/m & y/y, IFO Business Climate, Current Assessment and Expectations in Germany in January, UK December BBA Loans for House Purchase and Dallas Fed’s January Manufacturing Activity Index.
Currency Tech
EUR/USD
R 2: 1.1442
R 1: 1.1301
CURRENT: 1.1225
S 1: 1.1083
S 2: 1.1000
GBP/USD
R 2: 1.5269
R 1: 1.5077
CURRENT: 1.5025
S 1: 1.4903
S 2: 1.4817
USD/JPY
R 2: 120.83
R 1: 119.32
CURRENT: 118.18
S 1: 116.93
S 2: 115.86
USD/CHF
R 2: 0.9132
R 1: 0.8838
CURRENT: 0.8823
S 1: 0.8500
S 2: 0.8353