FOREX TRADING

FOMC Indicate A Sooner Than Expected Asset Sale In A Move To Drain Liquidity From The System!

• Yesterday’s trading saw a stronger USD across the board following the FOMC release of its January meeting. To summarize, the report communicated to the market that the Fed should start selling its assets soon so as to drain liquidity from the market. Philly Fed President Plosser said that he prefers the Feds balance sheet to return to pre crisis levels which is aligned with the views of Kansas City Fed President Hoeing’s position. On the data front we saw a rise in US industrial production by 0.9% indicating good strength in the manufacturing sector and housing starts also climbed by 2.8% showing a strong recovery in the housing sector as well. US 2 year yields rose to 0.88% following the FOMC minutes and USDJPY price action was between 90.15 – 91.38.
• In Europe we had a weaker than expected trade balance report coming in at EUR4.4bln. On the topic of Greece a spokesman in Brussels commented that Greece has not made any requests for financial help and also said that the monetary bloc was able to maintain financial stability. However it must be noted that Goldman Sachs took part in helping Greece issue certain off balance sheet derivatives so as to hide the magnitude of Greece’s deficit. EURUSD price action yesterday saw a rally up to 1.3787 and subsequently got hammered all the way back to 1.3556.
• In Japan we had the BoJ 2 day policy meeting take place; the result was to keep rates unchanged at 0.1%. BoJ Governor Shirakawa said in an earlier statement that the BoJ will maintain its easy monetary conditions so as to help the recovery.
• In the UK the BoE minutes showed the unanimous agreement to pause QE however the minutes showed that a few members are cautious about the nation’s economic outlook. The minutes also showed that the MPC ”would provide further monetary stimulus should the inflation outlook warrant such measures.
• Today the financial calendar will show CBI trends for the UK expected to come in at -36 and the public sector net borrowing figures (PSNB) expected to have dropped by GBP2.8bln. In the US we will have jobless claims initial and continuous. Producer prices and Phily Fed business index are also expected out of the US calendar today.

Currency to watch out for: EURUSD & USDJPY

The EURUSD pivot point is at 1.3675 with a preference to enter into short positions at 1.3655

The USDJPY pivot point is at 90.50 with a preference to enter long positions at 90.55

Today’s calendar and market movers:

UK PSNB for January expected to drop by GBP-2.8bln

UK CBI trends for January expected to drop by -36

US Jobless claims for the week expected to be 430K claims

US Philadelphia Fed for February expected at 17

Equity Markets:

US equities closed positive yesterday day with the DJIA and the SP500 closing 0.39% and 0.42% respectively. The European burses were positive yesterday with the FTSE up 0.62% the DAX and the CAC closing positive at 1.01% and 1.53% respectively. The NIKEI and the HSI at the time of writing is 0.28% and 0.03% respectively.

Markos Solomou
Easy Forex
http://www.easy-forex.com

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