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FX afternoon update - Euro boosted by positive data

By Michael Hewson

Date: Friday 12 Mar 2010

FX afternoon update - Euro boosted by positive data

Risk appetite was buoyed today with Euro zone industrial production seeing its strongest monthly gain on record in January, providing some welcome good news for the region and pushing the Euro up through its recent range highs and up against resistance in the 1.3770/80 area.
European Union statistics agency Eurostat said industrial production across the 16-nation euro zone spiked a better-than-expected 1.7% in January. Analysts were looking for a 0.7% monthly gain. On an annual basis, industrial production rose 1.4%, compared with December's upwardly revised 4.1% fall.
US economic data also provided a fillip to risk appetite as retail sales data for February came in markedly better than expectations at 0.3% against an expectation of -0.2%.
The yen weakened against the dollar after the data, pushing back from support at 90.20 with the market seemingly reluctant to test the BoJ's resolve with respect to a stronger yen.

EURUSD - the Euro traded up through its recent range highs at 1.3710/20 after this mornings positive industrial production data making a high of 1.3795. The key trend line resistance from the 1.5145 highs continues to weigh down on the market with the resistance now at 1.3770 which could be difficult to crack. A close above 1.3800 could well precipitate a move towards 1.4000.
The key downside support remains at 1.3485 on a daily close, with interim support around 1.3710/20.

GBPUSD - Today's US dollar weakness has seen the pound stage a remarkable comeback breaking above both resistances at 1.5080 and 1.5130 this morning. The next resistance level can be found at this weeks highs at 1.5195/1.5200, a break of which could well target 1.5330.
The key downside level on the cable remains 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.

EURGBP - We remain stuck in a range here with 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 continues to find resistance at the 90.70/80 area, a break of which could well target a move towards 91.15. The key resistance level remains at the 200 day MA at 91.90.
Fears of possible Bank of Japan intervention and strong US data has seen the dollar bounce off the support at 90.20. Yen repatriation ahead of the financial year end could well cap any upside in the dollar in the short term in any case.

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