Forex Daily Trading Overview for January 20th, 2010

NEW YORK (ForexNewsNow) – The daily Fundamental overview of the major currency pairs:

Euro Continues Rally on Mixed U.S. Housing Data:

The Euro continued trading higher on Tuesday after the daily forex news showed that U.S. Housing Starts had dropped more than expected to 529K, versus an expected 550K, a decline of over four percent and the lowest reading since October 2009.

The number was offset somewhat by U.S. Building Permits, which increased to 640K considerably better than the consensus of 560K. Nevertheless, the large increase in Building Permits may have been due to contractors getting their permits before new laws went into effect on January 1^st?

EUR/USD reacted favorably to the news, with the Euro extending its gains made on Tuesday despite the Eurozone Current Account showing a larger than expected deficit of -11.2B, versus -10.2B expected. EUR/USD rallied up to 1.3537 to make another recent high, before selling off later in the session, in early trading Thursday, the rate is at 1.3458.

In other Euro news, the ECOFIN meetings in Brussels concluded without finance ministers reaching an agreement about the possibility of increasing resources for the European Financial Stability Fund. While finance ministers discussed possibilities for increasing the amount, no increase for the EU bailout fund was endorsed.

The market looks forward to today’s ECB Monthly Bulletin and German PPI, as well as to U.S. Initial Jobless Claims and Existing Home Sales for further direction on EUR/USD.

Sterling Continues Higher After Positive Employment Numbers:

GBP/USD continued gaining ground on Wednesday after the U.K. Claimant Counts dropped by -4.1K in December, considerably more than the -0.3K decline the market was anticipating and their lowest level in 21 months. In addition, the U.K. Unemployment Rate continued steady at 7.9% as was widely expected.

Other U.K. numbers out on Wednesday were the U.K. Average Earnings Index, which increased by +2.1% 3m/y versus +2.2% expected, and the U.K. CB Leading Index that came out with a flat reading month on month, versus a previous reading of +0.4%.

Cable rallied sharply after the news, reaching 1.6036, but failed to break the high of 1.6058 seen on Tuesday. GBP/USD then traded lower and is trading at 1.5930 early Thursday.

Traders will be watching the U.K. CBI Industrial Order Expectations later today, and U.K. Retail Sales and Preliminary Mortgage Approvals on Friday to gauge Cable’s future direction.

Australian Dollar Makes Two Week High, Gives Back Gains:

The Australian Dollar gained substantially early Wednesday despite the Australian Westpac Consumer Sentiment survey dropping by -5.7%, versus a previous reading of +0.2%. Consumer Sentiment in Australia has been severely affected by the flooding in Queensland that could substantially impact the Australian economy.

The rate traded firmly over parity for most of the early session, but then began dropping despite China reporting quarterly GDP increased by +9.8%, considerably better than the +9.3 expected. Other economic numbers out of China indicate the country’s economy is still solid which will benefit Australia substantially.

The price of gold also rose early in the session, only to give back its gains later in the day. The Aussie continues to track the price of gold closely. Traders will be looking to today’s U.S. Existing Home Sales and Initial Jobless Claims and Friday’s Australian Import Prices. The Australian Dollar is trading at 0.9930 against the U.S. Dollar in early trading Thursday.

Japanese Yen Continues Gaining against the U.S. Dollar:

USD/JPY continued losing ground on Wednesday after the release of the Japanese Tertiary Index, which came out at +0.6% for December. The Yen benefited from positive numbers out of China, being one of their trading partners, and also from mixed housing numbers out of the United States.

The rate traded as high as 82.67 before the Tertiary Index was released and then sold off sharply, trading down to 82.11 initially. USD/JPY continued heading south for most of Wednesday’s session and is currently trading at 82.16.

Traders will be watching Thursday’s U.S. numbers, as well as the Japanese All Industries Activity for December, on Friday, for further indications about the direction of USD/JPY.

Canadian Dollar Sharply Lower After BOC Monetary Policy Report:

The Canadian Dollar continued selling off Wednesday after the Bank of Canada reiterated its dovish stance on interest rates and monetary policy in its quarterly report. Also putting pressure on the Loonie was Canadian Manufacturing Sales, which declined -0.8% month on month, considerably worse than the consensus of an increase of +0.6%.

USD/CAD is trading very close to parity in early trading on Thursday, at 0.9980. Traders will be watching today’s release of the Canadian Leading Index and Wholesale Sales, and Friday’s release of Canadian Retail Sales for a better picture on the direction of USD/CAD.