Forex Major Currencies Outlook (January 14, 2014)

The Federal budget balance came in better than expected and printed a larger surplus but was not enough to keep the dollar afloat. Today could be a different story as the US retail sales reports are due. Headline retail sales could see a 0.2% uptick while core retail sales might post another 0.4% increase. Bear in mind though that weaknesses in the labor market could result in poor consumer spending data but holiday spending could make up for that.

EUR

The euro rebounded against the dollar but caved to yen strength in yesterday’s trading as risk aversion took over the markets. There were no major reports released from the euro zone as the medium-tier Italian industrial production report printed weaker than expected results. For today, another set of low-impact reports are due from the euro zone so euro pairs might be more sensitive to risk flows.

GBP

The pound was unable to take advantage of dollar weakness yesterday, as the UK currency slipped against the yen as well. There have been no reports released from the UK then but traders are starting to worry that the UK is pulling back from its recovery. UK CPI is up for release today and the headline figure might show a 2.1% increase.

CHF

The franc found its legs in yesterday’s trading as it pushed USD/CHF back below the .9000 major psychological level. There were no reports released from Switzerland, as dollar weakness was the main driver of price action for the pair. There are still no reports due from the country today so risk sentiment might continue to push USD/CHF around.

JPY

The yen was in for a treat yesterday, as the low-yielding currency took advantage of risk aversion. USD/JPY made a strong break below its rising trend line while reversal chart patterns on other yen pairs were confirmed. Japanese traders are back from their holiday and we are seeing a set of Japanese data come in line with expectations. Bank lending showed a 2.3% uptick while the current account deficit landed at 0.05 trillion JPY.

Commodity Currencies (AUD, NZD, CAD)

Comdolls breathed a sigh of relief yesterday, as commodities posted rebounds in prices. However, the Loonie is still being weighed down by weak fundamental data and the Kiwi could get dragged lower by the recent Fonterra recall. A few Chinese medium-tier reports such as new loans and money supply are up for release and these might move the Australian dollar.

By Kate Curtis from Trader's Way