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FX afternoon update - US data fails to inspire as currencies continue to range

By Michael Hewson

Date: Thursday 11 Mar 2010

FX afternoon update - US data fails to inspire as currencies continue to range

The dollar has continued to drift in direction-less trade after US trade numbers showed a bigger reduction in the deficit for February to -$37bn, much better than expected. This was caused by a reduction in imported oil and motor vehicles, while weekly jobless figures showed a small improvement on last month, down to 462k, slightly higher than expected.

On the other side of the Atlantic in Europe, Greece was paralysed by further strikes against the package of austerity measures due to be brought in by the government to deal with the fiscal deficit.

Sterling has found some support after the release of a quarterly survey from the Bank of England, showing that expectations for inflation remain fairly muted, albeit to the upside slightly.

EURUSD - the Euro continues to trade in a broad range between the key downside support at 1.3485 on a daily close and the recent highs around 1.3700. The trend line resistance from the 1.5145 highs continues to weigh down on the market with the resistance now at 1.3790 which could be difficult to crack.

GBPUSD - The key levels on the cable remain at 1.4850, the 61.8% retracement of the up move from 1.3500 to the highs at 1.7045. A break below here would re-target 1.4400, the 22nd April 2009 lows. Resistance can be found at 1.5080 and 1.5130 in the near term.

EURGBP - the November and December 2009 highs at 0.9150 are the key barriers to further Euro upside here. Last week’s rally stalled at this level and remains the key barrier to further sterling losses. Euro dips should find some buyers around 0.8980 and 0.9020.

USDJPY - the yen has pared back some of yesterday’s losses finding resistance at the 90.70/80 area. The key resistance level remains at the 200 day MA at 91.90. The likelihood of higher Chinese rates should temper risk appetite and in turn boost the yen. Some yen repatriation ahead of the financial year end is also likely to cap any upside in the dollar in the short term.
The dollar should find support around 90.20, while also finding support around the 89.30 area which is the bottom of the cloud.

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