Forex - Euro's recent strength threatened by the ZEW survey of investor confidence

Forex News and Events: Dollar and Japanese Yen were massively sold off yesterday on improving risk appetite following rallies in global stock markets, lifted by banking stocks. Barclays mentioned a “strong start" to 2009 following similar announcement from Citigroup, Bank of America, Standard Chartered and Deutsche Bank earlier. Barclay's stocks rose as much as 15 percent in London while FTSE has increased by nearly 2.9% in previous session. Other major indices in Europe are up 2% or more and remain strong thanks to a reviving interest for risky assets. Also, the greenback remains pressured as markets are speculating that U.S. Federal Reserve may start to buy treasuries after the FOMC meeting due this week. While there has been talk of treasuries purchases from Bernanke for a while, Bank of England has indeed walked the talk last week, buying Gilts. Yield on 10-year UK government bonds fell to 2.94% to a 12 year low. Markets perceive the actions and results from BoE as a good example for U.S. Fed to examine the effectiveness of quantitative easing. Asia saw very quiet trading this morning with investors hesitating to sell USD and JPY further taking into consideration that that Nikkei is facing the 8000 psychological resistance level. DOW broke the 7400 strong resistance yesterday but gave back part of its gains to end up the session on a negative tone. EUR/USD eased over 1.3020 with talk of sizeable buying interest lower down near 1.2950 and 1.2900 while stops are said to lie near 1.3100. USD/JPY and EUR/JPY tried but failed to move higher as both were capped by exporter selling. Indeed, Yen weakened against the Euro as Global Asian Stocks were up 2 percent, of which Nikkei 225 Stock Average gained 3.2 percent. GBP/USD remains robust and traded up above 1.4130. We remain confident in forecasting further weakness for both USD and JPY should global stocks continues to rally. However, both of them will be sensitive to disappointing economic data and/or a failure to break out stocks indexes near term resistances mentioned above.

Today's Key Issues (time in GMT): 13:30 CAD Manufacturing Shipments MoM -6.00% vs. -8.00% 13:30 CAD Labor Productivity QoQ 0.20% vs. 0.00% 13:30 USD Producer Price Index (MoM) 0.40% vs. 0.80% 13:30 USD PPI Ex Food & Energy (MoM) 3.80% vs. 4.20% 13:30 USD Producer Price Index (YoY) -1.40% vs. -1.00% 13:30 USD PPI Ex Food & Energy (YoY) 3.80% vs. 4.20% 13:30 USD Housing Starts 450K vs. 466K 13:30 USD Building Permits 500K vs. 521K

The Risk Today: EurUsd EURUSD advanced in overnight trading to test 1.30 resistance again, led by capital flowed into more risky assets and pushed stocks higher across most Asian Indexes. Euro has been rising for 5 consecutive days, increasing by over 3%. Currency’s strength will be tested in European hours as the ZEW survey of investor confidence is forecasted to drop for the first time in four months. GbpUsd The GBP will probably face increased selling pressure over the coming week as economists forecast jobless claims in the U.K. to rise another 84.8K in February, and the labor market is likely to weaken further throughout the year as Great Britain’s economy is expected to face its worst recession since World War II. UsdJpy USD/JPY edges higher this morning but it's still limited below the March 5th 99.67 high. Outlook remains unchanged. The corrective three wave structure suggests that it's merely correction to the rise from 87.12 and such rise is still in progress. UsdChf Swiss Franc is pushed slightly lower, along with USD and JPY as risk appetite is looking for more risky assets. It remains, however, trading in tight ranges.

Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.3100 S 1.4240 S 100.00 S 1.2000 M 1.3067 S 1.4185 S 99.10 S 1.1930 K 1.3011 M 1.4120 S 98.90 S 1.1880 S 1.2982 1.4035 P 98.52 1.1845 1.2952 S 1.4000 98.05 M 1.1800 M 1.2918 M 1.3950 M 97.10 K 1.1770 S 1.2870 S 1.3880 M 95.65 S 1.1720 S S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot