Forex - Risk appetite shows its head – U.S Govt. to up its stake in Citi.

Forex News and Events: The dollar gave in the closing hours of last Friday’s trading day on reports a major U.S bank was in talks with the government for funds to recapitalize. The EURUSD traded from 1.2630 levels to a high of 1.2872 as the U.S banking sector had to be bailed out yet again to secure its financial viability. This new development on Wall Street has seen risk appetite improve momentarily as investors relish the attention the Fed and President Obama are giving to the financial sector. Secretary of State Hillary Clinton has urged Chinese officials to continue buying U.S treasury securities stating it was a matter of mutual interest, saying “our economies are so intertwined” and that “it would not be in China’s interest” if the U.S were unable to finance deficit spending to stimulate its stalled economy. The Yen continues to shed its haven status as further worries on the Nippon economy drive the Yen’s slump. Furthermore, incessant political jousting and inconsistencies have stifled any chance of a quick and comprehensive reaction. It seems that the bulk of Japanese repatriation flows for the March financial year-end completed and the deleveraging process that has been driving the Yen’s strength lately is in constant decline. The nexus between the Japanese equity and currency markets have broken down. This has seen the Yen give way to the Dollar and the Euro. Gold traded as high as $1’006.42/oz on Friday, a level not seen in a year. The all time high of $1’033/oz remains the short term target. An interesting relationship between the 1month USDJPY and XAUUSD charts show the vast transfer of funds into Gold on the part of Japanese firms in a bid to anchor their investments in the historical safe-haven commodity. USDCHF saw the Swissy rise sharply in the final hours of Friday trading as the dollar’s decline benefitted other currencies. The near 4-figure advance of the Swiss franc against the U.S Dollar comes as a surprise amidst the US – UBS banking secrecy debacle. The return of risk appetite seems to be benefitting the historically stable currencies such as the Swiss Franc and Sterling – rising 5 figures since Friday.

Today's Key Issues (time in GMT): 13:30 CAD Retail sales -2.7% vs. -2.4% 23:50 JPY Bank of Japan Monetary policy meeting minutes

The Risk Today: EurUsd momentary bull signal sees initial support at 1.2828 (38.20% retracement on 1.2561 – 1.2993 move. Further pressure on Euro will see 1.2777. On the upside if morning high of 1.2993 is broken it will open the way for Feb 10th high of 1.3092. GbpUsd Risk appetite benefitting the Sterling gaining almost 5 figures since Friday – with a notable weekend gap. Break above Feb 13th high of 1.4607 leaves the doors open for 1.4989. On the downside 1.4320 is mid-term support – slight support at 1.1.4467 (38.20% retracement). UsdJpy continued impetus for Yen decline has seen the pair rise somewhat uncapped recently. Initial support at 94.44. 94.93 level would lead the way higher. UsdChf pair snaps back from 1.1885. Solid support at 1.1467. On the upside 1.1674 stands as short term resistance on 1.1885 – 1,1463

Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.3092 K 1.4989 S 96.00 K 1.1885 S 1.2993 M 1.4878 S 95.20 M 1.1724 M 1.2879 M 1.4707 M 94.93 M 1.1674 M 1.2791 1.4567 94.60 1.1645 1.2828 M 1.4607 M 94.44 M 1.1563 M 1.2777 M 1.4320 M 93.87 M 1.1463 P 1.2655 K 1.4147 S 92.79 M 1.1402 S S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot