Friday, February 11, 2011

Markets began to fret over the potential bailout of Portugal

!! EUR/USD !!

The pair finished the week lower as market participants turned their
attention to the rising yields of the Portuguese government bonds
which is threatening to undermine the nation's debt issuance
curriculum and in turn lead to another bailout by the EU/IMF. In
addition, the go lower was supported by weaker than expected German
Factory Orders and Industrial Production data. Countering those fears
was a lower than expected take up of the ECB's 7-day "money
operation" which was especially welcomed given the looming stress
tests for the EU banks. By the closing stages of Friday the pair was
trading just above the key 1.3500 level, which once broken will open
the door towards a support level located at 1.3479 which is also the
38.2% Fibonacci retracement of the 1.2860-1.3862 go.

!! GBP/USD !!

The pair disastrous to benefit from the release of better than
expected BRC Retail Sales, as well as RICS House Price and finished
the week lower near the key 1.6000 level as renewed surge in the USD
which in turn weighed heavily on investor appetite for the currency.
In addition, speculation that high yields of government bonds will see
Portugal bailed out also aided to the renewed strength in the USD. In
terms of other UK specific news, despite the fact that the shadow MPC
voted 5-4 for a rate hike, the MPC of the BoE refrained from doing so
and instead kept both the Asset Hold Facility (APF) and interest rates
unchanged. In terms of technical levels, key supports are seen at
1.5922 which is also the 38.2% Fibonacci retracement of the Dec-Feb
go, followed by the 100DMA at 1.5825. On the other hand, resistance
levels are seen at 1.6020 and then at 1.6115/40.

!! USD/JPY !!

The pair finished the week higher amid a stronger USD as markets
started to fret over the potential bailout of Portugal, while a better
than expected weekly jobs data out of the US further boosted value of
the greenback.
The pair remained a by product of risk averse sentiment throughout the
session which in turn saw the pair thwart 83.00 level. It is worth
noting that Temperamental's said a lack of success by the Japanese
government on fiscal reform would have a negative implication for the
country's credit rating, while deputy administration director of the
IMF Naoyuki Shinohara said that Japan's large debt burden is also
But at the same time the Nikkei Business Daily reported that the
central bank may upgrade its assessment of the overall economy at a
monetary policy meeting next week.


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