Currency markets – Getting more interesting again.

EUR/USD (1,3040): EUR/USD stayed fine within the range last week and I suggest another week with range trading in EUR/USD, though slightly upwards adjusted. Regardless of range trading this week, then the currency market is getting more interesting.

Capital flows still dominate the swings, but with big fundamental happenings like the US unemployment data last Friday and growing concern about the Euro’s survival new trends will start (when the markets decides which is the biggest risk – mid term it’s still the upside in EUR/USD that I bet on).

The survival of the Euro I will save for a “Hot Topic” comment when time is right. In the meantime, in this weeks edition of The Economist a good article about the future of the Euro is published. They conclude that there is no alternative to the common unit – currently they are right, but I am not sure that the “man in the street” in some Euro countries will agree much longer.

2 data highlights this week are the US Jan retail sales on Thursday (exp. -0,4%) and the Euro Zone GDP for 4^th quarter (exp. -1,8% q/q). Further I follow the testimony from Mr. Bernanke Tuesday and also the US 10 year Treasury auction – actually pretty important.

I adjust the range from 1,2650 / 1,3250 to 1,2750 / 1,3350. 

Target: Range 1,2750 – 1,3250.

  
EUR/GBP (0,8760) – GBP/USD (1,4910): I am still totally wrong on GBP, which at least fits with the false view on equities last week as well.

No doubt that Sterling profits from growing risk appetite. As mentioned in the comments on the stock market are the markets in a current bull mood that also supports GBP.

Not much on economic data this week, so the Sterling swings will more be a function of capital flows i.e. mainly changes in risk appetite and stock markets.

I still go for the upside in EUR/GBP but need to lower the current target to 0,9000. GBP/USD I expect to trade around the current 1,4900 level.

Targets: EUR/GBP 0,9000 followed by 0,9500     GBP/USD range 1,3750 – 1,4250 .

EUR/JPY (119,40) – USD/JPY (91,40): Enough reasons to sell JPY during the last 5 – 6 trading days, so the good question is what the key driver is.

The Japanese equity market didn’t really perform like rest of the world and European based plus some Mid East investors actually sold JPY. Looks like a portfolio shift. Then we had the usual growing risk appetite leading to a JPY sell off.

The fundamentals were truly bad, confirmed Monday morning by the Machinery orders for December. In addition to all this a larger purchase from a single account went through Friday/Monday, but a one off.

The fundamentals will send JPY lower at a certain time, but not yet. I still argue that capital flows are the JPY driver right now. Being bearish equities makes me argue for a renewed test of the downside in EUR/JPY and USD/JPY.

Targets: EUR/JPY range 114,00 – 120,00  USD/JPY 88,00. Expect intervention.

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