Monday February 28, 2005 - 10:08:53 GMT
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FX Daily Technical Strategy
Yen jumps on output data, dollar eases broadly
The yen jumped on Monday after data showed Japanese industrial output posted stronger growth than expected in January, raising hopes that the economy may be pulling out of last year's slump.
The dollar eased against other major currencies, hitting a two-month low versus sterling, a seven-week low against the euro and skirting last week's one-year low versus the Australian dollar.
Traders cited everything from higher yields in the United Kingdom and Australia to a spike in oil prices and concerns about central banks diversifying reserves out of dollar assets as possible reasons for the U.S. currency's broad weakness.
The dollar fell to around 104.55 yen, down about two-thirds of a percent from the end of late week.
The single European currency rose as high as $1.3279, its highest level in nearly seven weeks. Sterling rose to a two-month high of $1.9239.
Japanese industrial output rose 2.1 percent in January from a month earlier, above a median market forecast for an increase of 1.7 percent.
The yen was buoyed also by comments from Bank of Japan Governor Toshihiko Fukui, who warned financial markets against assuming that the central bank's ultra-loose monetary policy would last indefinitely.
The dollar also withered against the currencies of nations where interest rates are already higher than U.S. rates.
The Australian dollar rose about two-thirds of a percent to around 79.20 cents. That was just short of a one-year high around 79.60 cents hit last week, despite Australia posting a trade deficit in January that was its second-highest ever.
The New Zealand dollar rose to 72.80 U.S. cents, short of a 22-year high of around 73.00 hit last week.
Some traders said the U.S. dollar was also still pressured by worries that central banks may gradually shift some of their official reserves out of the dollar.
The rise in oil prices for a sixth straight day was seen by some as negative for the dollar, based on the perception that the U.S. economy the world's largest consumer of oil -- is most vulnerable to higher prices.
But others noted another effect.
Dealers were awaiting a raft of upcoming economic events in the United States for dollar direction, including the Chicago PMI, ISM survey, and Friday's U.S. payrolls report.
EURO/DOLLAR: The euro should break decisively higher this week. We continue to favor a move up to the mid-January high around $1.3300 and probably the early December high area around $1.3450. The euro is fractionally overbought and momentum is very strongly bullish. For this morning allow for a little more work below $1.3280. Above here should take is up steadily to levels above. Bullish pressure remains while above $1.3200.
DOLLAR/YEN: Trading down from the 105.50 area and momentum has turned bearish, yet the US dollar is not oversold. Depending on where we close today, February's price action could well look like a `spike high'. For today we shall continue to allow for more work above the Ichimoku `cloud' at 103.95. Later this month we still favor a move below here, on across-the-board US dollar selling, to test the lower edge of the band since November and key support between 102.00 and the psychological level at 100.00.
STERLING/DOLLAR: Cable has moved cautiously through the 61% retracement area at $1.9160, to a high at $1.9239 today, and should up to better resistance around $1.9350/1.9400 this week. The more consolidation. It is almost overbought, momentum is steadily bullish, and lots of long positions need to be re-built. If we can hold above $1.9150 today bullish pressure is undiminished.
@13h30 GMT: U.S. January Personal Income
@15h00 GMT: U.S. January New Home Sales, U.S. February Chicago Purchasing Managerí Survey
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