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

European Union leaders gather for their first summit of 2012 as a deteriorating economy and struggle to complete a Greek debt write-off risk sidetracking efforts to stamp out the financial crisis.EU chiefs arrive in Brussels about 2 p.m. today to put the finishing touches on a German-led deficit-control treaty and endorse the statutes of a 500 billion-euro ($661 billion) rescue fund to be set up this year. Greece and its private creditors said Jan. 28 they expect to complete a deal in coming days after bondholders signaled they would accept European government demands for a bigger cut in their debt holdings. Efforts to hold the 17-member euro area together with bolstered fiscal rules and a stronger firewall are colliding with stalled progress in Greece, where the crisis began in 2009.To prevent a financial collapse, Greek bondholders have been pushed to cede more ground after agreeing in October to take a 50 percent cut in the face value of more than 200 billion Euros ($263 billion) of debt. “The fact we’re still at the beginning of 2012 talking about Greece is a sign this problem hasn’t been dealt with,”U.K. Chancellor of the Exchequer George Osborne said at the World Economic Forum in Davos, Switzerland. The summit follows warnings at the gathering that ended yesterday in Davos that it’s time to end the region’s debt crisis and that measures aimed at simply containing the turmoil are no longer enough. The euro economy is set to contract by 0.5 percent this year, according to the median of 19 economist forecasts compiled by Bloomberg.

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GBP/USD

Chancellor of the Exchequer George Osborne proposed laws to give the British Treasury sole power over when to bail out banks, sweeping aside opposition from the central bank as he seeks to end confusion over who should take charge during a crisis. The Financial Services Bill, laid before Parliament in London today, will give the chancellor power to order liquidity support for an institution, unwind its operations and all other aid for the financial system that requires taxpayers’ money. The central bank wanted those powers to be exempt from the bill, lawmakers said this month. “Independent central banks should not be put under pressure to do what governments do not have the courage to do on their own account,” Osborne said in a speech today to the World Economic Forum in Davos, Switzerland. “There will be no ambiguity about who is in charge.” Bank of England Governor Mervyn King resisted pressure from the Treasury to extend liquidity to banks from 2008, arguing that the bank shouldn’t bear potential losses from the support. Osborne said he hopes the measures will end the “paralysis and confusion” that began when Northern Rock Plc ran into funding difficulties in 2007 and continued through to the nationalization of Royal Bank of Scotland Group Plc.

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USD/JPY

 Japanese stock futures and Australian equities fell after the U.S. economy expanded less than forecast in the fourth quarter, dimming the earnings outlook for Asia’s exporters. American depositary receipts of Toyota Motor Corp., which gets almost 30 percent of its sales from the U.S., lost 0.5 percent from the closing price in Tokyo. Shares of Nippon Yusen K.K. and Mitsui OSK Ltd. may fall today after a Nikkei newspaper report the shipping lines may post losses amid falling cargo rates. BHP Billiton Ltd., Australia’s top oil producer and the world’s No. 1 mining company by market value, slipped 0.3 percent in Sydney after oil and metals prices declined.“The U.S. growth number was below forecast and that’s a negative,” said Toshiyuki Kanayama, a market analyst at Tokyo- based Monex Inc. “The market looks overheated, so investors are likely to use the report as an excuse to sell and lock in profit.”Futures on Japan’s Nikkei 225 Stock Average expiring in March closed at 8,825 in Chicago on Jan. 27, compared with 8,830   in Osaka, Japan. They were bid in the pre-market at 8,810 in Osaka at 8:05 a.m. local time. Australia’s S&P/ASX 200 Index slid 0.1 percent today, while New Zealand’s NZX 50 Index added 0.1 percent in Wellington.  

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USD/CAD

Canada’s dollar is set to outperform commodity-exporters Australia and New Zealand as the U.S.economy accelerates while China’s output cools. Down 0.4 percent this year after having lost 1.4 percent in 2011 against nine major peers in Bloomberg Correlation-Weighted Indexes, Canada’s dollar rose to parity with the U.S. dollar for the first time last week since November. Foreigners piled into Canadian money-market securities at more than double the record pace set in 2008. Speculators have cut bets that the currency will fall against resource-rich peers. The outlook is improving as Canada grows in lockstep with the U.S. and after it swung to a merchandise trade surplus in November on higher exports of energy and automobiles. The Australian dollar is the most overvalued  in two decades versus the so-called loonie, while slower Chinese growth amid higher inflation may lessen the attraction of countries that depend on selling raw materials to Asia’s biggest economy.“The Canadian dollar is ripe for a rally,” Ray Attrill, head of currency strategy at BNP Paribas SA in New York, said in a Jan. 24 telephone interview. “It has heavily underperformed its commodity-currency peers. It should be reflecting the better economic performance in the U.S. that we’re seeing.” Canada sells about 75 percent of its exports to its southern neighbor, accounting for about 25 percent of its C$1.7 trillion ($1.7 trillion) gross domestic product. It is the biggest supplier of energy to the U.S., the world’s largest economy.

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