Highlights in the Foreign Exchange Market
• The Greece's cabinet approved its latest austerity measures sought by the IMF and EU as a condition for a 130-billion Euro rescue package, raising the chances of a deal next week to avert a disorderly default on its debt. The approval unveiled details of the extra budget and public sector wage cuts worth 325 Million Euros that were approved unanimously.
• China's central bank cut the amount of cash banks must hold in reserves ,boosting lending capacity by an estimated 350-400 billion Yuan, in a bid to raise the amount of credit creation as the world's second-biggest economy faces a fifth successive quarter of slowing growth .
• UK retail sales rose 0.9% in January compared with December. The figure was much stronger than the expected drop by 0.3%. The figure was boosted by strong sales of furniture and sports goods as shoppers were tempted by steep discounts. Meanwhile, the Bank of England, Governor Mervyn King, said this week that the economy should "gradually" recover this year as cooling inflation helped reduce a squeeze on consumers' finances.
Economic Events OF The Week
Monday JPY- Trade Balance (Fcst. -0.83T).
Tuesday -AUD- Monetary Policy Meeting Minutes - RBA Gov Stevens Speaks-NZD- Inflation Expectations q/q
-GBP- Public Sector Net Borrowing (Fcst. -8.9B) -CAD- Core Retail Sales m/m (Fcst. 0.3%).
Wednesday -GBP- MPC Meeting Minutes (Fcst. 0-0-9) -USD- Existing Home Sales (Fcst. 4.67M) - Crude Oil
Inventories -EUR- French Flash Manufacturing PMI (Fcst. 48.7) - German Flash Manufacturing PMI (Fcst. 51.1).
Thursday -USD- Unemployment Claims (Fcst. 345K) -EUR- German Ifo Business Climate (Fcst. 108.6) - ALL- G20
Meetings.
Friday GBP- Revised GDP q/q(Fcst. -0.2%) -AUD-RBA Gov Stevens Speaks -USD- New Home Sales(Fcst. 316K)
Volatility Rising in the FX Markets
The US Dollar had a mixed performance against its major counterparts towards the end of the week as uncertainties rising from the Greek debt situation provoked a highly volatile environment in the FX market. The Euro reached a high of 1.3287 boosted by the Greek parliamentary vote at the beginning of the week, but failed to break the 1.3300 level, as markets remained cautious on Greece. The single currency then dropped dramatically as Moody's Investor Service downgraded a number of European countries and warned to strip France and the UK of their top rating, citing the debt crisis. Additionally, the less favorable news flow and the delay of the second Greece aid package from the troika added more pressure on the Euro as it reached a low of 1.2973. However, on Friday sentiments improved, induced by better-than-expected claims from the US labor market helping the currency regain some of its losses to close the week at 1.3145. The Sterling Pound opened the week at 1.5775 and reached a high of 1.5862. Cable quickly lost its gains, in parallel with the Euro, and reached a low of 1.5642. The currency erased its losses on Friday as it closed the week at 1.5830. Similarly, the Australian Dollar has weakened from relatively firm levels amid the current contraction in risk, despite a better than expected employment figure, as it reached a low of 1.0625. The Aussie recouped its losses, reached a high of 1.0798, and closed the week at 1.0702. Finally, the Japanese Yen dropped sharply against the greenback throughout the week as the BoJ unexpectedly added JPY 10 trillion to an asset-purchase program after the economic slide fuelled criticism that the central bank was slow to act. The USDJPY dropped to a low of 77.35 at the beginning of the week, only to surge gradually towards a week high of 79.62. The Yen closed the week at 79.55.
Moody's Downgrades Six European Countries
Moody's Investor Services cut the debt ratings of six European countries including Italy, Spain and Portugal, and said it may strip France and the UK of their top ratings, citing Europe's debt crisis. Slovakia, Slovenia and Malta also had their ratings lowered. The Euro weakened following the announcement from Monday's high of 1.3285 to a low of 1.3150 in early trading on Tuesday.
Greece still on spot The Greek Saga continued last week as the postponement of the Greek aid package from the troika and the flow of negative news fueled volatility and uncertainty in the market. The Greek situation remains unclear. However, what had been viewed as constructive developments in the situation over the past month has obviously broken-down alongside the continued delays in getting the Euro-Zone officials to approve the second bailout package for Greece. Meanwhile, the head of the Euro group of EU finance ministers, Jean-Claude Juncker, said that substantial progress had been made on the Greece aid package and expressed confidence that an agreement on the matter would be reached on their next scheduled meeting on February 20. On the other hand, other media reports indicated that Germany, the Netherlands and Finland are taking a tougher position on the Greece aid package conflicting with the more optimistic comments from Mr. Juncker.
Friday Session Close
• Weekly Major FX CLOSE
Open High Low Close
USD/JPY 77.54 79.61 77.36 79.50
EUR/USD 1.3208 1.3284 1.2974 1.3151
CAD/USD 1.0008 1.0051 0.9938 0.9961
GBP/USD 1.5775 1.5862 1.5644 1.5834
AUD/USD 1.0688 1.0798 1.0628 1.0711
Despite the unexpected improvement in the data issued by the United States as Jobless benefits expectedly dropped last week to the lowest level in four years, indicating that the labor market is gaining momentum. Applications for jobless benefits decreased by 13,000 to 348,000 lower than market expectations, and the least since March 2008. The slowdown in firings coincided with a pick-up in hiring to help repair the damaged US labor market But the major currencies continued to move within the same range by rolling over the past week.
• US EQUITY CLOSE
Last Change
DJI 12949 45.0+
NASDAQ 2951.7 8.07-
S&P500 1361.2 3.71+
Improvement in the housing data had a clear impact on the close of the U.S. stock indexes the Builders took initiative on more homes than expected in January, helped by better weather conditions, adding signs that the real estate market is stabilizing. Housing Starts rose to 699,000 annually from December's 689,000 pace. Builders reported that more orders are a result of a pick-up in hiring, cheaper properties and borrowing costs at record lows.
• Precious Metals
Close Open
Gold 1722.6 1733.10
SILVER 33.22 33.83
Precious metals prices reduced the gains against the U.S. dollar during the trading week as the fall in the price of gold per ounce levels of $ 1733 an ounce with the start of trading week, the lowest level at 1705 dollars an ounce before trading ended the week at 1722 dollars an ounce, we will take a close look on the gold movement for this week. the following table shows the opening and closing prices of precious metals during the last week.
• Energies
Close Open
Oil 103.61 99.34
NG 2.687 2.448
Crude oil was biggest ginner for the second week A bullish movement bush the price to close above 103.30 and that make us reconsider the uptrend movement will continue, the next trading target will be around the 106 , 107 levels we do expect that Any trading above 100.00 shall maintain the bullish bias this week.
Chart of the Week
This week we will take a close look at the gold chart and the expectations of the gold movement for the week.
Fell slightly on Friday as the market cooled a bit in the end. The $1,700 level is just below, and obviously supportive at this point in time. The area that the market has been trading in looks set to continue to be restrictive to overall movement,1762 levels will lead the gold price to the key era around 1804$ levels but the support should be taken into account as the recent surge has been so impressive. The sideways action looks more and more like a simple consolidation of gains and a pause before the next leg up than any real threat of falling. Because of this, we are buying still, and look at the recent action as the perfect opportunity. We do not recommend to sell unless the market close below 1700$ .
Chief Technical Analyst
Mohammed AL Mariri
Mohammed ALMariri (Brokers manager )
Mohammed Al Mariri is a holder of business administration degree from the academy of science and technology – Egypt 2001
Holder of IFB (International Financial Broker) From the Economic Academy Kuwait 2009
CFTe (Certified Financial Technician) level I Candidate (December 2011 Session)
Member of the (STA) Society of Technical Analysts ( member #:08450039549)
Joined AFB team in 2007 with 5 years previous experience in FOREX market in Gulf region.