‘Currency War’ On G20 Agenda

U.S. Dollar Trading (USD): The USD gained heavily against the Euro but lost ground against the Yen with markets profit taking ahead of the G20 and some Weak European GDP Numbers. Weekly Jobless Claims came in at 341k vs. 360k forecast in a positive sign for the world’s largest economy. Many comments overnight regarding recent the Jawboning from Japan to Norway shows a world on the brink of currency war ahead of the G20. Looking ahead, January Industrial Production forecast at 0.2% vs.0.3% previously. Also G20 meeting in Russia Begin.

The Euro (EUR) The Euro collapsed across the board after shock miss inthe German GDP for Q4 started a large sell off in EUR/JPY. EUR/JPY had bee nenjoying a fast rally for the last 2 months and the shock of an EU Q4 GDPfigure of -0.6% Q/Q sent the fast moving pair down 200 pips to Y124 support.Further losses are possible ahead of the G20 with traders cautious of any potentialstatements regarding Japans recent Yen losses. The Sterling (GBP) Heavy EUR/GBP selling help slow the GBP/USD lossesovernight where the market found support at 1.5480 before stabilizing at thefigure. GBP/JPY selling has accelerated however and so the major is likely to continue to be under pressure with a significant change in market mood.Looking ahead, January Retail Sales forecast at 0.5% vs. -0.1% previously. Also December European Trade Balance forecast at 13bn vs. 13.7bn.

The Japanese Yen (JPY) was in the headlines with a BOJ meeting where theoutgoing Governor Shirakawa made the case for the recent monetary expansion toget the Japanese economy out of recession. The Market was stable until theEuropean GDP shocks sent the EUR/JPY and the USD/JPY back plummeting to freshweek lows. Australian Dollar (AUD) the AUD/USD tried to break the key resistance againat 1.0370 but failed to breach the strong level and has been in a range between1.0360 and 1.0340 for the past two trading sessions. The recent selling has been due to EUR/AUD buyingand so when that reversed aggressively last night we saw support from the crossin the major. Looking ahead, G20 meeting to affect the Yen directly if theymention Japan Explicitly.

Oil & Gold (XAU) Gold continued to be under pressure with support found near $1630 in Asia. OIL/USD remained supported on dips near $97 beforestabilizing and closing $97.40.

Pairs to watch

USD/JPY – G20 to produce more Yen volatility?

NZD/USD – Breaking Fresh Year Highs above 0.8500

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