Previous session overview

• Good data out of the US and bad data out of the UK on Friday helped the USD end the week in positive territory.
• The yen gained against the dollar and euro in Tokyo Monday as players sought safety in the Japanese unit after the U.S. government said it may allow General Motors Corp. and Chrysler LLC to go bankrupt.
• After news emerged around 0400 GMT that the White House will give failing marks to GM and Chrysler’s restructuring plans, the dollar fell more than half a yen.
• On Friday EUR suffered its biggest daily loss since January, USD1.3590 to USD1.3260, assisted by comments from German Minister Steinbrueck that the EUR is at risk if the EU stability pact is not taken seriously.
• The scheduled UK event risk to come down through the wires was lacking in market-moving potential Friday. The Office for National Statistics reported a sharper than expected contraction in the UK’s economy through the final reading on fourth quarter GDP numbers. GBP USD traded with a low of USD1.4264 and a high of USD1.4494 before closing the day at 1.4305 in the New York session.
• The Japanese Yen fell heavily from the highs seen on Thursday as crosses came under pressure and risk aversion once again instigated Yen buying. USD JPY finished above JPY98 but also dipped towards JPY97 intraday.
• The Australian dollar’s rapid ascent ran into cooler terrain in Asia Monday. Largely on the back of another round of risk aversion and as traders await guidance from domestic economic data and speeches by key Reserve Bank of Australia officials in coming days.

Market expectation

• The euro is off its initial lows Monday, even as concerns remained about the euro-zone economy.
• Some of the initial euro weakness may have been due to a weekend report by The Times, which cited billionaire investor George Soros as saying the U.K. may need billions of pounds in aid from the International Monetary Fund.
• Players also sold the euro against the yen as investors’ appetite for the higher yielding common currency, seen as a riskier investment, grew weak on the news of the U.S. auto manufacturers’ possible collapse, dealers said.
• Strong euro-yen sales weighed, taking euro-dollar back to USD1.3200, with weight able to extend lows into early Europe to USD1.3182. Rate currently trades back around USD1.3200. Bids seen placed toward USD1.3180, more between USD1.3160/50 with stops placed on a break below. Resistance – USD1.3250, stronger between USD1.3280/90.
• Euro-sterling moved above the overnight highs and on to stg0.9327, currently trading around stg0.9325. Offers seen placed to stg0.9330, more toward stg0.9350 ahead of stg0.9390/00. Support seen placed at stg0.9280, stronger on approach to stg0.9250.
• For Pound demand seen in place between USD1.4160/40, a break below to open a deeper move toward USD1.4100, ahead of stronger interest at USD1.4085/80. Resistance seen placed at USD1.4200, a break above to open a move on toward USD1.4230 ahead of USD1.4250.
• Eagerly awaited are speeches by RBA Deputy Governor Ric Battellino Tuesday, followed by Assistant Governor Guy DeBelle later in the day.
• Traders will be looking for any guidance on whether the bank is in a mood to resume its rapid fire policy easing, having paused last month when it kept rates steady at 3.25%.
• Also in focus this week is Thursday’s monthly policy decision by the European Central Bank, as well as U.S. non-farm payrolls at the end of the week.

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