Major CurrenciesTechnical Analysis: January 27, 2012

Talks on a debt swap to lower Greece’s borrowings and avert a collapse of the economy resumed y as international policy makers squabbling over the mounting cost of the rescue.  The negotiators on behalf of private creditors namely Charles Dallara and Jean Lemierre returned to Athens after European finance ministers insisted bondholders take bigger losses on their Greek debt. The International Monetary Fund further roiled the discussions by suggesting that public holders of Greek bonds might also have to increase support. Before they reached on this situation, the parties were blindly searching for a solution three months after private bondholders agreed with European officials to implement a 50 percent cut in the face value of more than 200 billion euros ($262 billion) of debt by voluntarily swapping bonds for new securities. That was the start of economic contraction that exceeded estimates has made the goal of cutting Greece’s debt to 120 percent of gross domestic product by 2020 harder. An accord is tied to a second bailout for the country which faces a 14.5 billion-euro bond payment on March 20. The effect of the announcement made by the Fed made the euro to rally once again. In fact the dollar weakened versus all its 16 most-traded counterparts and touched a five-week low against the euro. The announcement did really surprise the market and added the rally till yesterday. The dollar was little changed at $1.3106 per euro afternoon in New York after surging to $1.3184, the weakest level since Dec. 21.

EUR/USD H1" title="EUR/USD H1" width="841" height="752">

GBP/USD

The pair continues to strengthen following through higher and opening the door for further upside momentum. With the 1.5666 level, its Jan 03, 2012 high now violated, the threat is for a full recapture of the 1.5691 level. Meanwhile, Retail sales in the United Kingdom decreased significantly in January, after growing in the previous month. As much as 44 percent of retailers surveyed said sales volumes decreased from last year in January while 22 percent recorded an increase, giving a balance of -22 percent. The balance figure was markedly higher than -6 percent economists forecast. The latest balance was the lowest since March 2009, when the difference was -44 percent. In November, the balance came in at 9 percent, marking the first growth in sales in seven months. In the wholesale trade sector, 59 percent of respondents said their sales increased in January, while 22 percent recorded a decline, giving a balance of 36 percent.

GBP/USD h1" title="GBP/USD h1" width="841" height="752">

USD/JPY

An index measuring corporate service prices in Japan was up 0.1 percent on year in December, the Bank of Japan said standing at 96.4. That follows the downwardly revised reading of -0.1 percent on year in November. On a monthly basis, corporate service prices were unchanged after easing a downwardly revised 0.1 percent in November. For the fourth quarter of 2011 corporate service prices were flat both on quarter and on year. Japan is on Friday scheduled to release December figures for inflation and retail sales, highlighting a modest day for Asia-Pacific economic news. Nationwide core CPI is expected to ease 0.1 percent while core CPI for the Tokyo region considered a leading indicator for the nationwide trend is tipped to show -0.3 percent. Retail sales are expected to add 0.4 percent on month and 2.1 percent on year after shedding 2.0 percent on month and 2.2 percent on year in November. Also, the Bank of Japan will release the minutes from its monetary policy meeting on December 20 and 21. Following the meeting, the bank announced that it was keeping interest rates unchanged at 0.10 percent.

USD/JPY" title="USD/JPY" width="841" height="752">

USD/CAD

The loonie rallied as the longer effect of Feds announcement that results from higher crude oil prices. As we all know that Canada derives about half of its export revenue from the sale of raw materials, including crude. It pushed the loonie and reached to its strongest level since November 1 and headed for a 1.2 percent advance on the week. The Canadian currency appreciated 0.3 percent to C$1.0016 per U.S. dollar afternoon in Toronto after touching 99.82 cents. One Canadian dollar buys 99.84 U.S. cents.  Everyone expects a lot of volatility in the market till next few weeks and weakening wouldn’t be seen as significant unless loonie will depreciate more than C$1.0070 per U.S. dollar. Meanwhile, Government bonds advanced, pushing the benchmark 10-year note yield down two basis points or 0.02 percentage point to 2.02 percent. Thirty-year bond yields fell two basis points to 2.63 percent. Canada will auction C$2.5 billion ($2.5 billion) of 10-year notes on Feb. 1. The 2.75 percent securities mature in June 2022.

USD/CAD" title="USD/CAD" width="841" height="752">