Currency markets – Capital flows decides once again……

EUR/USD (1,3140): Like last week it’s more about risk aversion and swings in equity markets than anything else. EUR/JPY plays a good role in this game, where the large sell off did sent EUR/USD below the expected 1,3000 – 1,3500 range last week. I keep the same range as I expect stocks to trade more in the positive territory (please read the equity part).

Like for equities, this coming Friday’s US GDP number (exp. -5,0%).will decide if EUR/USD closes the week up or down.

The moves in EUR/GBP and EUR/JPY will also mean a great deal this week. EUR/GBP has rebounded but the trend is higher, and with slightly upwards moving stocks EUR/JPY should trade higher as well. It speaks for a EUR/USD move towards 1,3450 before 14.30 CET Friday.

Target: Range 1,3000 – 1,3500.

 
EUR/GBP (0,9420) – GBP/USD (1,3925): Sterling remains to be the wild one……EUR/GBP is back in the middle of the 0,9300 – 0,9700 range but GBP/USD went south of the expected range.

The EUR/GBP range I keep as it is, also the view that we will reach 1,0000 but we need more bad fundamental data to trigger the move. This week doesn’t offer this sort of data and another sell off in equities is not to expect right now either.

A fair discussion is if the market will be hit by intervention if EUR/GBP reaches 1,0000 ? We are close to that level but haven’t heard any real warnings from Bank of England. Britain welcomes the low Sterling as a monetary impulse so it’s hard to say how much political will there is to intervene. We are talking about 2 currencies within the Euro Zone. Meaning it’s highly sensible and both parties need to agree, and probably coordinate, on the action. It doesn’t seem likely right now. If the market panics above 1,0000 we will have verbal intervention from Bank of England.

GBP/USD will trade on the weak side during the week but around 1,4000 giving a range of 1,3750 – 1,4250.

Targets: EUR/GBP range 0,9300 – 0,9700 followed by 1,0000     GBP/USD range 1,4300 – 1,4700 .

EUR/JPY (117,50) – USD/JPY (89,40): USD/JPY will stay in the positive trend where higher equities supports USD/JPY higher and vice versa. Though, fundamentals also will move JPY this week.

The December retail sales on Thursday (exp. -0,4%) is important but Friday we have a whole bunch of December numbers. I regard the jobless rate (4,1%), household spending (exp. -3,6%) and industrial production (-9,0%) as very important – all of them. Thursday and Friday morning is the time for JPY followed by the US GDP data on Friday afternoon – it will be an exciting day.

Despite EUR/JPY is fairly volatile I keep the range from last week. The USD/JPY target at 88,00 was reached. I stay with that target as well. Looking ahead USD/JPY will be sold off again after this week.

Targets: EUR/JPY range 115,00 – 121,00  USD/JPY 88,00. Expect intervention.

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