FX Focus

Shortly into the European trading session today, the continental currency once again turned south and has been falling against the US dollar. For the most part, news out of the eurozone was better than expected; however, 'better than expected' definitely did not mean 'good' as far as the market was concerned. Eurozone M3 Money supply shrank by 0.2% which was less than the expected contraction of 0.6% and the unemployment rate came in one tick less than expected at 10.0%. Even though the data was better than expected, it still highlights the long road ahead before we see any meaningful type of broad economic recovery. Also adding strength to the US dollar is the Advanced GDP Growth rate of 5.7% that was posted earlier today. As of this writing the euro is still holding slightly higher than yesterday's low point; however, it remains down well over 200 pips for the week. Dan Cook, Chicago

After trading in a very small range through the Australasian session, sterling got a boost as we headed into the open of the UK markets when the Nationwide House Price Index for Britain jumped the most in 5 months, showing 1.2% growth. This news release did provide a quick pop up for the GBP; however, this strength would be very short lived and soon after the US dollar gained momentum. A very positive Advanced GDP figure of 5.7% continued to fuel dollar strength heading into the US trading session. After a week of trading that was typified by consolidated price channels, followed by extreme, near vertical price swings in either direction, GBP is only slightly lower than where we started after the weekend. From a technical perspective, it is important to note that all week we did bounce between levels of support around 1.6090 and resistance around 1.6280; however, since the release of the US GDP report this pair has made a break through the longer term support zone between 1.6065 and 1.6090 which could keep the downward pressure on this pair. Heading into the weekend though, anything can happen and I would estimate that most traders are going to wait until trading resumes next week to gauge what direction this pair may take. Dan Cook, Chicago

The US dollar has been gaining steadily against the yen after a Japanese trading session which witnessed a slew of economic reports. On the positive side Household Spending at 2.1%, Japanese Unemployment Rate of 5.1% and a decline in Housing Starts of 15.7%, were all better than expected. On the negative side, Manufacturing PMI at 52.5, Tokyo Core CPI at -2.0% and Preliminary Industrial Production at 2.2% were all worse than either the previous reading or the expectation. Throw in the mix the release of meeting minutes from not one, but two BoJ Monetary Policy Meetings and a speech by Bank of Japan Governor Shirakawa in which he stated that 'the Bank is prepared to act swiftly and decisively should concerns that financial market stability might be hampered re-emerge,' and it all added up to yen weakness. While the trend of the last few days has been toward dollar strength, it is important to note that the longer term trend starting on January 7th has been all about the yen gaining strength. For now we will have to wait until next week to determine if this new shift is in fact a trend change or simply a small correction in an otherwise downwards trend. Dan Cook, Chicago