Forex - U.S Stimulus plan fails to convince, Risk sentiment deteriorates.

Forex News and Events: U.S treasury secretary Geithner’s exposé yesterday failed to rally the enthusiasm expected – what ensued was a general decline on global stocks. The European session was drawing to a close by the end of the meeting. The projected $2Tn financial rescue plan set to compliment the already accepted $819Bn Stimulus plan ($838Bn if the Senate get their way) saw the FTSE consequently fall by 2.2%, DAX down 3.5% and CAC-40 down 3.6%.   Currency markets saw risk sentiment deteriorate drastically as the U.S Stimulus and financial bailout plan didn’t seem to curb skepticism on a U.S and subsequently global recovery. The EURUSD traded a range of 1.2848 – 1.2909 through the night after a rally culminating at 1.3074 in the run up to the speech, to then decline rapidly to 1.2848 – The Euro has risen as developments in the Euro zone act as impetus for the currency. Numerous ECB council members have voiced their opinions on the need for a more aggressive stance with regards to monetary policy and interest rates – a lack of a united front by the ECB on this issue is set to weigh on the Euro. Furthermore, a convergence in global interest rates and renewed risk aversion will continue to drive demand for the greenback for the time being.   Asia reacted very much like the U.S (Dow down 300 points) and European Markets did to yesterday’s developments – Australia's S&P/ASX 200 was down 0.8% with South Korea's Kospi Composite off 1.8%, Taiwan's main index 0.7% lower and Hong Hong's Hang Seng Index the worst performer in Asia, down 3.2%; Japanese markets were shut for a public holiday.   The Japanese Yen continued to strengthen against the dollar as it does when the greenback rises against other currencies. The risk averse trades and continued “haven” status of the two major currencies has brought on a notable decoupling of their price action. The USDJPY traded a range of 90.52 to 90.23 during the night, to seek new week lows at 89.83 this morning.

Today's Key Issues (time in GMT): 09:30 GBP Jobless claims change (JAN) 89 vs 77.9 10:30 GBP BoE releases quarterly inflation report 10:45 EUR ECB’s Stark speaks 13:30 USD Trade Balance -35.5 vs -40.4 14:50 USD Fed’s Duke speaks on stabilizing housing market 15:00 USD Treasury’s Geithner testifies on TARP at senate budget panel 18:00 USD Chicago Fed’s Evans speaks on U.S Economic outlook 19:00 USD Federal Budget -78 vs -17.8

The Risk Today: EurUsd Convergence towards the 1.2900 pivot sees the pair’s broad moves lead to a potential breakout opportunity. Downward channel slows, initial focus for a support level points to 1.2927, opening the doors for 1.2835 – strong support at 1.2814. Resistance on the upside sits on 1.2983 – with a strong resistance in the 1.3075 – 1.3093. GbpUsd The cable is testing new lows for the week. We see initial support at 1.4395 (today’s lows) then 1.4365 (Feb 5th lows) – further down 1.4052 (Feb 2 low). On the upside 1.4535 stands as a soft resistance (23.60% retracement on 1.4988 – 1.4395 move). UsdJpy The pair is trading at its lows, focus on 89.75 (breakout move). 88.58 as a strong support – a level tested several times in recent weeks. On the upside 90.58 holds, then momentum could heads towards 91.13. UsdChf Pair tested 38.20% retracement on 1.1718 – 1.1509 move several times before continuing to decline as inflation risk recedes 1.1509 stands as strong support, opening the doors for 1.1412. Upside sees 1.1738 then 1.1781.

Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.3095 S 1.4855 S 94.69 K 1.1781 M 1.3075 M 1.4566 M 91.93 M 1.1738 M 1.2983 M 1.4535 K 90.58 M 1.1613 S 1.2950 1.4493 89.86 M 1.1542 1.2927 M 1.4395 M 89.75 M 1.1509 S 1.2835 M 1.4365 M 88.58 K 1.1412 S 1.2814 S 1.4052 S 87.12 M 1.1318 M S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot