EUR/usd
Last week ended with a correction. Players were too weak to break through 1.34 in eurusd. As before, they just hit the level without being able to consolidate at it. The bulls should be encouraged by the fact that Friday's retracement was not that big as at the beginning of the week. Thus, we still expect that growth will continue in the coming days. What we need is a good reason. It's quite likely that the euro will again be moved by news from Spain. In the previous two weeks the rally was provoked by positive results of the auctions. This week we expect short-term 3 and 6-month bill auctions and also housing and employment statistics. The data will hardly be very impressive, but it's quite likely that upon the whole the news won't be too bad. Thursday will be important also due to the release of the Prelim PMI for the EU core countries. So, this week the market players will focus their attention on the real economy. Friday's data on Consumer Sentiment from UoM proved to be less optimistic than expected. In January the index fell from 72.9 to 71.3 in comparison with the expected growth to 75.1. Once again the market economists and analysts will have to admit that the consumer demand cannot grow as fast as the market demand for risky assets. Shortly after the crisis McKinsey's experts analyzed the preceding similar drops and came to the conclusion that the household deleveraging will last at least 6 years. Now the US households have come through the phase of active shrinking. The housing market reversed to grow both in prices and sales volume, but it's a very bumpy road.
GBP/USD
The pound is still lagging behind other majors. Friday's decline drove the pair to 1.5830 – the low of mid November. It's remarkable that the decline was lasting 6 days in a row. It's a very rare case, just the third or fourth time in history. In this connection we believe that in the short term it would be reasonable to consider buying the pair, though we shouldn't forget about the fundamental weakness of the sterling. Production still cannot recover and the Bank of England has failed to spur the demand. According to McKinsey's research, the British households are still in the phase of touching the bottom.
USD/JPY
There are still some bulls in the yen. They didn't allow usdjpy consolidate above 90. This morning it retraced to 89.60. Tomorrow morning the BOJ will publish its decision on the monetary policy. Now it is rumoured that the BOJ will raise the inflation target to 2% and the government will keep stimulating the economic activity despite the big budget deficit. Be careful as speculations about this have been observed for a long time, so the old rule – “buy rumours, sell facts” – may work this time.
USD/CAD
We were right about the Canadian dollar. The currency's weakness on Friday let it cover the gap of the beginning of the year against the dollar. USDCAD jumped as high as 0.9946, but today it slightly retraced to 0.9910. Anyway, it doesn't seem that sellers of the Loonie are going to stop at this. Canada has exported a lot of raw materials to the USA, including oil products, and now the States themselves are well supplied with them.
