FOREX >>> WEEKLY MARKET RECAP, WEEK AHEAD, AND SCHEDULE 02 MARCH 09 EURO, YEN, CNY, CABLE

€ The euro depreciated vis-à-vis the U.S. dollar last week as the single currency tested bids around the $1.2605 level and was capped around the $1.2990 level. The pair lost about 130 pips last week. The Obama administration assumed up to a 36% stake in Citigroup and views nationalization as a last resort. The Fed and government are conducting stress tests on banks. Obama announced a US$ 3.55 trillion budget plan for 2010 with a US$ 1.75 trillion deficit. Bernanke cited “significant stresses” in many markets and an ongoing “severe contraction.”

ECB’s Gonzalez-Paramo said the ECB “has succeeded in anchoring inflation expectations.” Eurogroup’s Juncker doesn’t see EMU-16 countries defaulting. ECB’s Draghi said disinflation cannot be allowed to become deflation. The ECB is expected to ease rates by 50bps on Thursday.

Data released in the U.S. last week saw the Chicago Fed’s national activity index decline in January; Q4 GDP growth was off 6.2% with the Q4 GDP price deflator up +0.5% and PCE up +0.8% q/q; the Chicago Business Barometer improved to 34.2 in February; final February University of Michigan consumer sentiment fell to 56.3; January durable goods orders were off 5.2% m/m and 23.3% y/y; January new home sales were off 10.2%; January housing starts were off 16.8% with building permits off 2.9%; weekly initial jobless claims were up 36,000 to 667,000; continuing jobless claims were up 114,000 to 5.112 million; the February Richmond Fed’s manufacturing index worsened to -51; February consumer confidence fell to 25; Q4 2008 house prices fell a record 3.4%; the December S&P/ Case-Shiller home price index was off 18.5%; and January existing home sales were off 5.3% to an annualized 4.49 million.

Data released in the eurozone last week saw German January CPI up 0.6% m/m and 1.0% y/y; EMU-16 unemployment rose to 8.2% in January; EMU-16 CPI fell to 1.1% y/y; February EMU-16 consumer confidence fell to -33; EMU-16 January private sector loan growth eased to 5.0% from an annualized 5.8% rate; the German GfK consumer climate index rose 2.6 points in March; the EMU-16 money supply fell 0.8% m/m and nearly 25% y/y; EMU-15 December new industrial orders were off 5.2% m/m and 22.3% y/y; the German Ifo business climate index fell to 82.6 from 83.0 in January; and German Q4 GDP was off 2.1% q/q.


Technical Outlook
Last week’s high (1) was above the 76.4% retracement of the 1.2328-1.4718 range and last week’s low (2) was near multi-month lows. The 1.2892/ 1.2927/ 1.3204/ 1.3359/ 1.3597/ 1.3745 levels represent upside resistance targets while the 1.2548/ 1.2328 levels represent downside support targets.


¥/ CNY The yen depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the ¥98.70 level and was supported around the ¥92.75 level. The pair gained about 450 pips last week. The Nikkei 225 stock index climbed 1.48% on Friday to close at ¥7,568.42. U.S. House Democrats are calling on Obama to pressure Japan into not devaluing the yen. BoJ Policy Board meeting minutes revealed skepticism over continued rate cuts. Aso talked up the dollar, saying weakness in it “would cause significant effects.”

Data released in Japan this week saw January housing starts off 18.7% y/y; January construction orders were off 38.3% y/y; January industrial production was off 30.8% y/y; January retail sales were off 2.4% y/y; the January jobless rate printed at 4.1%; January all-household spending was off 5.9% y/y; January core CPI was unchanged y/y; February sales conditions at small and medium-sized firms receded to their lowest levels since 1984; and the January corporate services price index declined 0.9% m/m and 2.2% y/y.

Last week’s high (1) was right around the 50.0% retracement of the 110.64-87.10 range and last week’s low (2) was right around 23.6% retracement of the same range. Upside resistance targets remain the 98.43/ 101.65 levels while downside support targets remain the 96.10/ 92.66/ 88.88/ 87.10/ 84.20 levels.


The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8405 in the over-the-counter market, up from CNY 6.8367.

₤ The British pound depreciated vis-à-vis the U.S. dollar last week as cable tested bids around the US$ 1.4110 level and was capped around the $1.4660 level. The pair lost about 105 pips last week. BoE’s MPC is likely to cut rates on Thursday and may announce operational authority from the government to expand its balance sheet and quantitatively ease. The government wants to reinvigorate lending at Northern Rock and upped its stake in RBS to 84%. Blanchflower cited risks of a “protracted” recession and said ₤90 billion is a “good starting point” for the U.K. fiscal stimulus.

Data released in the U.K. last week saw Nationwide February house prices were off 17.6% y/y; the CBI February retail sales balance improved to -25; Q4 business investment was off 3.9% q/q and 7.7% y/y; January net mortgage lending printed at ₤2.9 billion; and Q4 GDP was off 1.5% q/q and 1.9% y/y. Last week’s high (1) was below the 23.6% retracement of the 2.0156-1.3501 range and last week’s low (2) was near a multi-decade low. Upside resistance targets include the 1.4720/ 1.5071/ 1.5475/ 1.6043 levels while downside support targets include the 1.3682/ 1.3501/ 1.2810 levels.