Speculation the global economic recovery is slowing spurred demand for Japan's currency as a refuge. The yen advanced against all of its 16 major counterparts before a report today forecast to show German consumer prices fell this month, signaling Europe's largest economy is struggling to exit from recession. German consumer prices, calculated using a harmonized European Union method, fell 0.4 percent this month after rising 0.9 percent in December, according to a Bloomberg News survey before the Federal Statistics Office releases the data today. The yen climbed to 125.52 per euro as of 6:49 a.m. in London from 126.16 yesterday in New York. It earlier rose to 125.30, the strongest level since April 28.
The dollar weakened for a second day against the yen on concern the Federal Reserve will maintain its pledge to keep interest rates near zero for an "extended period" when it ends a two-day policy meeting today. Japan's currency advanced to 89.25 per dollar from 89.65, after reaching 89.14, the strongest since Dec. 18. The euro was little changed at $1.4059 from $1.4072.
The Fed should keep its key overnight rate in a range of between zero and 0.25 percent today. Futures in Chicago show traders have been cutting bets the Fed will raise its target rate by June. The odds for an increase of at least 25 basis points were 21 percent, down from 26 percent odds a week ago.
Forex resistance & support |
| EURUSD | GBPUSD | USDJPY | USDCHF | | 1.4240 | 1.6340 | 91.10 | 1.0550 | | 1.4160 | 1.6240 | 90.30 | 1.0510 | | 1.4100 | 1.6170 | 89.90 | 1.0440 | [...]
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AUDUSD is slightly higher today (touching a high of 0.9045) after fourth quarter CPI came out stronger than expected at an annualized pace of 2.1%; above the RBA's inflation target of 2-3%. Markets are now pricing in a 73% chance of another 25bp hike when the RBA convenes on 2nd Feb, which if realized would represent the fourth rate rise in as many meetings. The JPY is also stronger today as risk appetite remains nervous about the risk of China tightening policy, and reports of artillery fire between North and South Korea also briefly weighed on USDJPY and EURJPY. JPY bulls will also be encouraged by comments yesterday from Japan's PM Hatoyama that there were no immediate plans to counter the recent strength of the JPY. In the meantime, Asian equities have had a mixed session after their 7 day slide; it is likely most traders will be wary ahead of tonight's FOMC meeting. Yesterday's US data was encouraging on the whole; the Case Shiller home price index showed a modest gain (albeit lower than forecasts), consumer confidence rose significantly to 55.9 against expectations for a 53.5 reading, and the Richmond Fed clawed its way up to -2 from last month's -4 level. Fed policy makers are extremely unlikely to make any change to the current level of Fed Funds tonight, but clearly it will be important to see whether they signal a future policy path that is misaligned with current market pricing. Today we will also get Barack Obama's scheduled State of the Union address; likely to garner increased attention given the profound impact on financial markets he had last week when announcing plans for reforming the banking system. In the morning session we will get the latest German CPI figures for January; expected to rise once again to +1.0% YoY (from 0.9% last month). It has been suggested that markets are starting to speculate that the ECB may begin monetary tightening before the Fed, and any economic data to support this scenario is likely to be supportiv [...] Forex trading - live day trading course and currency trade room.
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[/caption] Asian stocks are lower today, weighed by tech stocks and lingering fears about the state of Greece and Portugal's economic problems. The USD has strengthened on these fears, and also gleaned some support from the reassurance than Federal Reserve Chairman Bernanke was confirmed for a second term – eliminating the uncertainty of an interim period at Fed with only temporary leadership. Overnight, Japan's core CPI fell 1.3% YoY in December; smaller than the drop in November – but the narrowest measure of inflation (so-called core-core CPI which strips out the volatile food and energy components) had its biggest drop since records began in 1970. This is likely to put further pressure on policymakers to do more to try and support the economy and prevent another slump ahead of summer elections. The reading may also threaten the credibility of the BoJ who stated in their policy meeting on Tuesday that deflation was likely to be milder than anticipated; and will strengthen their conviction in possible FX intervention should current JPY strength persist. USDJPY has climbed back above 90.00 and is now trading around the highs at 90.25. GBPUSD is still trading choppily after yesterday's negative statement from ratings agency S&P; who have stopped classifying the UK among the most stable, low-risk banking systems. So far, GBPUSD has found a near-term base at 1.6111, but with market sentiment increasingly swayed by t [...] 
