Market Drivers - Currencies
Today's Comment
The Chinese PMI manufacturing data, which were announced tonight, were a tad below 50 and supported thus China's most recent reduction of reserve requirements. The figure indicates that China is not facing a hard landing, and the markets reacted therefore favourably and sent Asian shares slightly up.
Today, focus will be on the announcements of European PMIs (at 9.28 a.m. –German, 9.58 a.m. total for EUR). From the UK, minutes of the latest monetary-policy meeting will be announced (at 10.30 a.m.). This may be interesting reading, as the inflation report most recently had a more 'hawkish' rhetoric than expected and questioned whether BoE expects further quantitative easing in the course of 2012.
We have for long been waiting for a sign of a correction and the agreement about Greece was the first sign for us. In yesterday's markets we also observed a 'slowdown'/pattern of indecisiveness. The timing is, however, difficult –the 3-year liquidity allocation is waiting ahead, and there is no doubt that it is in fresh memory of the markets that the ECB's most recent auction (20 December) was the starting signal of a massive 2-month risk rally (until today), and global equities have increased almost constantly since then by a total of 14%.
EURJPY (Neutral to SELL ): we have adjusted to SELL with S/L at 107.40 and T/P. The stop is placed above the critical resistance level at about 107.20 and 200MA. We still do not believe that the timing is right for a long-term structural shift towards a weaker JPY (we do not expect this until H2 2012 at the earliest), but we must acknowledge that the movement above 80 in USDJPY points to the opposite, so there is certainly arisk. If the levels around 107-107.40 are breached, we will reconsider our long-term view.
USDNOK (Neutral to BUY):yesterday, we upgraded to BUY. S/L at 562.95 and T/P at 591. Oystein Olsen's speech about the Norwegian economy yesterday indicated concern about the economy. He refrained from making predictions about interest rates, but mentioned that the interest rate is an important variable for the NOK. Mr. Olsen's dilemma is that a lower interest rate may add to what could look like a house-price bubble.
NZDUSD (NEUTRAL): a string of technical indications point to the fact that this cross rate has potential on the downside.We recommend a sell order at 83.02.
EURUSD (NEUTRAL): from a technical point of view, a breach of 133.20 will signal that we may again see a level at about 135. A level below 131.50 will trigger the correction.
Chart: USDNOK
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