Currency markets – different currencies, different factors to watch…..

EUR/USD (1,3350): The greenback is still fundamental weak, but EUR got hammered with the sudden sentiment change regarding ECB on Thursday. A 50 basis point cut is now fully priced in EUR/USD. If ECB don’t cut or choose something else than 50 basis points I think it will be negative for EUR, regardless what ECB will choose instead of 50 basis points.

I continue to argue that the market mainly reacts to fundamentals making the Dec. US retail sales on Wednesday as very important this week (exp. -1,4% ex. autos). The Dollar will correlate positive with the number.

With the FX market following fundamentals the US Beige Book Wednesday evening is a market mover as well, and to some extend the Jan. Philly Fed on Thursday (exp. -35,0).

With the underlying weakness in Dollar I prefer the upside in EUR/USD but within a range. Though I need to adjust last weeks range from 1,3500 – 1,4000 to 1,3250 – 1,3750 followed by higher levels the coming weeks.

Target: Range 1,3250 – 1,3750.

 
EUR/GBP (0,8980) – GBP/USD (1,4855): I have since many years not heard a finance minister speak so negative about the domestic economy as in UK lately. At the same time the UK base rate was cut to a 315 year low. One at least can say its historical times…….

Sterling truly was sold down during last autumn and towards the year end, but I think it will be sold off again.

There will only be a few economic numbers released during the week, so the domestic situation and even some spill over from the stock market will dominate Sterling.

I go for a move back into the ranges suggested last week.

Targets: EUR/GBP range 0,9300 – 0,9700     GBP/USD range 1,4300 – 1,4700 .

EUR/JPY (118,90) – USD/JPY (89,10): USD is coming nicely down and I still expect Bank of Japan to intervene somewhere below the pain level at 90,00. I am surprised that EUR/JPY is so close to 118,00. It is of course due to the general sell off in EUR but we are back in serious and important correlation with the negative equity market.

I expect the equity market to be a main mover for EUR/JPY, where USD/JPY moves the Japanese equity market – leading to downwards acceleration.

The Nov. machine orders on Thursday (exp. -8,0%) are normally very import, but we all expect a bad number and the nominal number is so large that big swings doesn’t surprise.

USD/JPY will reach 88,00. EUR/JPY I would like to be long but it’s also a function of EUR in general and equity markets. A long EUR/JPY position is more difficult this week, maybe next week.

Targets: EUR/JPY range 117,00 – 125,00  USD/JPY 88,00. Expect intervention.

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