US Dollar, Yen Plummet Against Major Counterparts

The holiday season called for a quiet week last week in Europe, with no major economic news released and limited market movement.

This week and with the coming of the New Year, the most important news anticipated from the eurozone are the Markit Manufacturing PMI for Germany and the EU on January 2nd, which are predicted to rise to 54.2 and 52.7 respectively, and the EU Consumer Price Index on January 3rd which is estimated to stay unchanged at 0.9%.

An array of overall positive news was released in the US last week, with Durable Goods Orders increasing to 3.6% from -0.7% and surpassing hopes of 2.0%, and New Home Sales for November also rising above expectations of 0.445M to 0.464M.

Initial Jobless Claims fell from 380K to 338K which was above the expected 345K, however Continuing Jobless Claims, which paint a better picture of the situation long term, rose to 2.923M compared to the previous figure of 2.877M.

Despite a significant amount of encouraging news however, the USD plummeted against its major counterparts on Friday December 27th, with EUR/USD reaching 1.38922, GBP/USD 1.65772 and USD/CHF 0.8799.

The drop was due to speculations that the Federal Reserve will not be raising interest rates any time soon, following the tapering of its asset purchase program.

The first week of 2014 holds in store the release of Construction Spending (MoM) for November and the ISM Manufacturing PMI for December, both expected slightly worse than the previous months.

It was a quiet week for the UK as well, with the most important fundamental data released being the BBA Mortgage Approvals for November, which increased to 45.0K from 42.8K, providing solid ground for the GBP to perform well.

This week the data expected in the UK is predicted to act as more good news, with Mortgage Approvals set to increase and Consumer Credit for November forecast to rise to £0.700B on January 3rd.

Data in Japan was not so satisfactory last week, with the Bank of Japan (BoJ) Monetary Policy Meeting Minutes hinting that the BoJ is likely to expand its stimulus package due to fears that the negative economic growth during Q3 of 2013 will continue into 2014.

On Thursday December 26th the data released was mixed, with a negative unemployment rate of 4.0% for November, low Overall year-on-year Household Spending at 0.2% and a positive National Consumer Price Index at 1.5%.

The yen found no ground for support last week and suffered losses against its major counterparts. This week will be one of limited action for Japan, with no important fundamental data due to be released.

What to Watch this Week:
EURUSD – Support levels are 1.3730, 1.3700 and 1.3680, while Resistance levels are 1.3770, 1.3800 and 1.3870.

GBPUSD – Support levels are 1.6470, 1.6455 and 1.6440, while Resistance levels are 1.6500, 1.6515 and 1.6545.

Due to January 1st being a public holiday, the market opening on the 2nd may come with tangible gaps due to low liquidity and high volatility.