US Data Impresses To Boost Dollar

!! Market Brief !!
The declaration by California's new governor Gerry Brown that the
largest US state's economy is in a situation of fiscal emergency has
not really gained much traction, but we suspect that as Europe opens
it will. The statement was made to force local politicians to deal
with the $25.4bn budget deficit, however so far, there has been little
reaction in the FX markets. Yesterday's strong US data supported the
dollar amid an uninspiring session for equities in the Asian session.

However, Shanghais composite was able to pull out of this recent slump
(prompted by concerns about the PBoC tightening policy), and rallied
1.42%. US equities closed vaguely negative while Treasury yields
advanced, despite falling late in the session. Crude and gold fell to
$88.55 and $1349.60, respectively. FX markets were range bound; EURUSD
1.3390-1.3520, USDJPY 82.00-83.10 but interestingly the strong US data
print did give the USD a boost especially against the JPY and CHF.
Initial jobless claims fell more than estimates to 404k which implies
the weaker trend in Q4 has been sustained. US Existing home sales
astonishingly jumped 12.3% in Dec to a 5.28 million, the highest
monthly print since mid 2010, and the Phil Fed. manufacturing survey
slipped down to a still robust 19.3 in Jan. Overall the US data was
encouraging and revived the idea that the USD should be considered a
growth currency.

The GBP rally due to sudden rate hike expectations seem to be cooling
down as yesterday the cable broke below 1.5905, then 1.5880 support.
However it was able to rally back above 1.5900 this morning. Today
brings us German IFO and UK retail sales; for the GBP, the growth
numbers will be crucial especially if they print higher – perhaps
hinting that the domestic economy could manage with some inflation
fighting tightening. Markets will be watching events in the EU and
barring a unseen event this Friday, expect risk correlated trades to
rally.

!! Currency Tech !!
*EURUSD*
R 2: 1.3634
R 1: 1.3575
CURRENT: 1.3510
S 1: 1.3400
S 2: 1.3245 *GBPUSD*
R 2: 1.6074
R 1: 1.6038
CURRENT: 1.5915
S 1: 1.5837
S 2: 1.5810
*USDJPY*
R 2: 83.70
R 1: 83.15
CURRENT: 82.80
S 1: 81.85
S 2: 8095
*AUDUSD*
R 2: 1.0171
R 1: 1.0077
CURRENT: 0.9870
S 1: 0.9840
S 2: 0.9800
* S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot
Source: Fxstreet.com