G20 Quiet On Japan, USD/JPY Soars

U.S. Dollar Trading (USD) was generally strong across the board with USD/JPY soaring after support was found and the G20 remained quiet on FX movements. Feb UoM Consumer Sentiment improved to 76.3 vs. 74.8 previously. Some USD strength came from FED member Pianalto who saw risks from QE3 and diminishing returns onAsset purchases. Looking ahead, Holiday for Presidents Day.

The Euro (EUR) - The Euro rallied on EUR/JPY buying and comments from ECBmember Weidman that no rate cut would occur just to weaken the Euro. The large tech level at 1.3300 held and we bounced to session highs near 1.3375. The outlook is mixed with the pullback from 1.3700 to 1.3300 threatening the longer term uptrend.

The Sterling (GBP) - Heavy GBP/USD selling was seen after terrible January Retail Sales at -0.6% vs. 0.5% forecast m/m. The 1.5500 level was broken and we fell to fresh trend lows at 1.5460 before recovering back to the1.5500 figure for the close. The market has turned extremely bearish with 1.5000 the medium term trend target. Looking ahead, Eurozone current account forecast at 14.8bn previously; ECB PresidentDraghi Speaks.

The Japanese Yen (JPY) - The USD/JPY was the main currency in play with traders cautious of a G20 statement that highlighted the recent aggressive monetary policy and Yen weakness. USD/JPY fell to Y92 and EUR/JPY to Y123 before a leaked G20 draft statement was quiet on Japan. The market took this as implicit permission for Japan’s policies. The next big Japanese news will be the new BOJ Governor selection. Australian Dollar (AUD) the AUD/USD came under pressureafter failing to break above 1.03700 on multiple occasions on Thursday andFriday. The bulls threw in the towel and we fell to 1.0300 and opened weak inAsia Monday leading to more calls of AUD/USD weakness technically. Looking ahead, no economic data.

Oil & Gold (XAU) Gold selling accelerated after the G20 played downthe currency wars. OIL/USD fell back sharply from $97.40 to $95.40 reacting toa dip in US January industrial production -0.1% vs. 0.2% forecast.

Pairs to watch

USD/JPY – Back to rally mode target Y95?

XAU/USD – to continue selloff or bounce from $1600?

TECHNICALCOMMENTARY