Technical Analysis: EUR/USD, GBP/USD, USD/JPY, and USD/CAD

EUR/USD

German unemployment fell more than forecast in December as exports of cars and machinery boomed and one of the mildest winters on record helped support jobs in construction. The number of people out of work fell a seasonally adjusted 22,000 to 2.89 million. Economists forecast a decline of 10,000 and adjusted jobless rate  dropped to 6.8 percent. German companies, working off orders for exports and investment goods have so far defied a debt crisis the European Commission says risks triggering a recession in the euro area. Carmaker Audi AG  said on Dec. 27 that it may add 1,200 jobs this year as it expands investment in electric vehicles and light-metal technology. Airbus SAS maker of the A380 superjumbo, whose German production sites include Hamburg, said Dec. 14 that it’s seeking 4,000 more workers. Of Hamburg’s largest 200 employers, 42 percent said they plan to boost hiring in 2012. With the exception of a 6,000 increase in October, German unemployment has now fallen in every month since June 2009. The average jobless total in unadjusted terms for 2011 squeezed below the 3 million mark at 2.97 million, the lowest since 1991. The euro rose 0.7 percent to $1.3028 afternoon trading in Berlin as expansion in manufacturing sector in U.S and China damped the appeal of safer assets.

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GBP/USD

The U.K. manufacturing sector showed signs of stabilization at the end of 2011 after notable declines in both November and October. The seasonally adjusted manufacturing Purchasing Managers' Index rose unexpectedly to 49.6 in December from a revised reading of 47.7 in November. Production was broadly unchanged in December following back-to-back contractions. At the same time, the rate of decline in new orders slowed as the trend in new exports strengthened.  Reflecting increased levels of new work from clients in Germany, East Europe and China, new export orders rose for the first time in five months in December. Outstanding business decreased for the eleventh consecutive month.  Average input costs fell for the second successive month with the rate of decline accelerating to the most marked since June 2009. Factory gate prices rose only moderately and to the least marked extent during the current 26-month period of inflation.  Companies cited weak demand and strong competition as reasons behind the restricted increase in charges. Manufacturers reported further depletion of inventory holdings with stocks of purchases and finished goods both falling over December.

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USD/JPY

The cross remained apathetic after the positive ISM-Manufacturing data in the US, trading lower as risk appetite sharpens in today’s session. The Japanese currency is appreciating against its American counterpart for a second day in a row; however, market participants remain cautious as another government intervention is highly likely as the prices deepen further. As of writing, the pair is retreating 0.30% at 76.71 with the next support lying at 76.30 followed by 76.00 then 75.31and the psychological level at 75.00 On the upside, a breakout of 77.20 would bring 77.43 then 77.54 and 77.74. The yen was able to maintain its recent bullish trend against the euro in trading yesterday, as the EUR/JPY pair dropped to a 10-year low. Investors are reverting to the safe-haven yen as the euro-zone debt crisis stays in the news. Further problems in the euro-zone may bring the pair even lower.  Traders will want to pay attention to any comments from the Bank of Japan regarding the yen's current high levels. Japan's economy is largely based on exports, meaning that a solid yen does not work in the country's favor. The BOJ has been known to inject capital into the marketplace to influence the value of the yen in the past. If they decide to do so once again, the JPY may turn bearish very quickly.

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USD/CAD

Canada’s dollar may appreciate to a two-month high if it closes above its 100-day moving average against the U.S. currency. A close stronger than that technical level would be its first since August and may spur the currency to parity. The loonie last traded on a one-for-one basis with the greenback on Nov. 1. Canada’s dollar appreciated 0.9 percent to C$1.0097 per U.S. dollar. The loonie touched C$1.0077, its strongest level since Dec. 8. One Canadian dollar buys 99.04 U.S. cents. The loonie’s 100-day moving average is C$1.0143 and a move to parity may prompt further appreciation to the 200-day moving average of 99.03 Canadian cents. The Canadian dollar is getting a boost from overextended long positions in the U.S. dollar or bets it will.

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