Rates, data support USD rebound

US data this past week pointed to a further gain in momentum for the US recovery, with personal spending, Chicago PMI, both ISM surveys, factory orders and chain store sales all rising and beating estimates. Even the heavily distorted January US jobs report held some good news. Buried in the data, and driven by census adjustments, nearly 600K jobs were created in December, papering over the weaker Jan. job gains. US Treasury yields rose on the back of the improving outlook, with 10-year yields breaking higher out of the nearly 2-month consolidation range and reaching levels last seen before last summer’s slowdown. More importantly, US rates reversed recent spread widening against the USD, suggesting an important USD low may have been seen. A week that began with risk being embraced and the USD being shunned saw a sharp reversal for the greenback, though most of the gains were against the EUR. For the week, however, the US dollar index posted a large ‘hammer’ on weekly candlesticks, a bullish reversal pattern after a decline. We look for the USD to gain further ground in the weeks ahead, especially against EUR and JPY. If the dollar recovery proves more substantial, we may see commodities and commodity currencies lose some further ground.

In contrast, the Euro witnessed a sharp reversal after making new highs for the year after ECB Pres. Trichet indicated rates were appropriate and that inflation risks remained balanced. That view effectively quashed market speculation of a near-term ECB rate hike and sent the Euro reeling. Trichet also avoided responding to questions on the timing of the ECB’s exit strategy, suggesting a greater likelihood that unlimited ECB lending to beleaguered Eurozone banks would be extended beyond the previously indicated March expiration. At the end of the week, EU leaders were unable to reach agreement on the so-called “competitiveness package’ put forward by Germany, suggesting that significant divisions remain within the union. Also, earlier in the week, Germany rejected the idea of allowing the EFSF (European Financial Stabilization Facility) to buy peripheral nations’ bonds in secondary markets. Such a move was seen to provide the best hope for high-deficit countries to retain access to capital markets, and without it the risk of those countries needing a bailout is back in the picture. EUR/USD has managed to hold above the break level of 1.3520/40, but has dropped back into the daily Ichimoku cloud (top at 1.3626), suggesting a downside bias now prevails. Once below 1.3520, we would look for additional weakness to the 1.3365 daily Kijun line initially.

Источник: FOREX.com

04.02.2011