Friday February 11, 2005 - 11:41:25 GMT
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FOREX: US OPEN MARKET POINTS 02-11-05
All Talk No News for the Dollar
With Japan closed for National Foundation Day and only a smattering of Euro-zone data on the calendar the FX markets have settled into a narrow price range as dealing in the majors is listless. As many commentators have already pointed out yesterday’s reversal in the EUR/USD from a low of 1.2740 to a high of 1.2900 was a function of too much expectation and too little substance. With sentiment becoming more and more skewed towards dollar bulls as the week progressed, the US Trade Balance needed to print a material reduction in the deficit to justify further dollar gains. Instead, a large portion of the decrease ($1 Billion) was the result of lower oil prices indicating to the market that US Balance Sheet problems are likely to persist for the foreseeable future.
Next week the market will focus intensely on Tuesday’s TICS report, as traders will need to be reassured that US is attracting enough capital flows to offset the record trade deficits. Last month’s number of $81 Billion was slanted to the upside due to seasonal and technical factors. Therefore, the December TICS report will take on an even greater importance as market players will try to asses if the uptrend remains in place.
Wednesday’s Treasury auction of 5 year notes produced decidedly mixed results with bid to cover ratio slipping to 2.05 from 2.68 and indirect bidders comprising 28.5% of the pool which as Brian Edmonds, head U.S. Treasury trader at Banc of America Securities LLC in New York stated was “a bit of a disappointment, but it wasn't disastrous”. It is too early to tell if the Treasury auction data reveals a concerted shift in attitude on the part of foreign Central Banks and can serve as a precursor to next Tuesday’s TICS data. Nevertheless, we find it worth of note.
Since the US economic calendar is empty today, the most probable event risk comes from the speeches from Fed’s Yellen and Bernake, neither one of whom is likely to utter any dollar negative comments. Therefore, in absence of any additional news the pair may consolidate yesterday’s move as everyone positions for next week.
FX Spot Overnight
- EUR static at 2860 after yesterday’s gains
- JPY hovers around 105.50 as JPY markets closed
- GBP retraces some of its gains to 8670
- CHF steady at 2080 mirroring euro
JPY National Foundation Day - Markets Closed
- 19:50GMT – (02:50 PM EST) US Fed's Yellen speaks at economic summit in San Francisco
- 20:45GMT – (03:45 AM EST) US Fed's Bernanke speaks at economic summit in San Francisco
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