AUD/USD Above Important Support

* The dollar drifted lower versus most major currencies on Tuesday. Economic releases were light ahead of Friday’s important US employment data. US December pending home sales increased modestly following November’s record drop. The dollar index fell for a second day, easing deflationary pressures on stocks and commodity prices. The S&P 500 rose 14.13 to 1,103.32, remaining above the 1,100 resistance for 8 days. The yen was up slightly against the greenback while little changed versus the euro. The single currency rose for a second day ahead of the European Commission’s report on the Greek financial plan. Sterling was higher but unable to rise above the 1.60 handle. The Canadian dollar rose on higher commodity prices.
* The AUD/USD fell after the Reserve Bank of Australia unexpectedly kept its key interest rate unchanged at 3.75%. RBA Governor Glenn Stevens said rates will be “adjusted further” to keep inflation within the target range of 2%-3% if the economy “evolves broadly as expected.” The pair has recently been pressured by consolidating commodity prices and fears that China’s tightening will reduce Chinese economic growth. After breaking its strong uptrend late last year, the AUD/USD had made a triple top. The 0.87-0.88 area support held today. There is important support in the 0.86 area. If this support is broken, the AUD/USD will turn more bearish.


Financial and Economic News and Comments

US & Canada

* US pending home sales grew a more-than-expected 1.0% m/m in December after a revised 16.4% m/m November fall that was the largest since records began in 2001, with the US pending home sales index released by the National Association of Realtors increasing to 96.6 from November’s downwardly revised 95.6. December pending home sales rose 10.9% y/y, showing a broad improvement in sales over December 2008’s level.


Europe

* Eurozone producer prices were up 0.1% m/m in December, a third consecutive month-on-month increase, after an upwardly revised 0.2% m/m advance in November, Eurostat reported. December producer prices slid a less-than-expected 2.9% y/y following a 4.4% y/y November decrease, registering the longest 12-month stretch of declines since a 14-month slide in 1998-1999.


* Germany’s retail sales, adjusted for calendar and seasonal variations, increased a slightly less-than-expected 0.8% m/m in December, the third gain in 4 months, after a revised 1.7% m/m decline in November, data from the Federal Statistical Office showed. December retail sales fell as forecast 2.5% y/y, a fifth consecutive year-on-year decline, following November’s revised 2.5% y/y fall.
* The CIPS/Markit UK construction PMI increased to a higher-than-expected 48.6 in January from 47.1 in December, indicating the pace of contraction in the UK construction sector slowed for a third consecutive month, according to data released by Markit Economics and the Chartered Institute of Purchasing and Supply.
* The quarterly SECO Swiss consumer confidence survey index improved to -7 in January from -14 in October 2009, indicating a continued improvement in Switzerland’s consumer confidence, the State Secretariat for Economic Affairs said.

Asia-Pacific

* Japan’s monetary base increased 4.9% y/y in January after rising 5.2% y/y in December, according to a report released by the Bank of Japan.
* Japanese labor cash earnings fell 6.1% y/y to ¥549,259 ($6,051) in December, deepening the pace of declines following a revised 2.4% y/y November decrease, according to figures from the Ministry of Health, Labor and Welfare.
* The NAB Australian business sentiment index fell to 8 in December from 19 in November, indicating Australia’s business confidence declined to the lowest level in six months, according to a survey released by National Australia Bank Ltd. The business conditions index held steady at 10 in December, suggesting conditions on hiring, sales and profits remained unchanged from the prior month.
* The Australian Industry Group/Commonwealth Bank performance of services index declined to 47.4 in January from 50.0 in December, indicating Australia’s services activity contracted for the first time in four months, a report by the AiG and Commonwealth Bank of Australia showed.

Source: Hans Nilsson

02.02.2010