The Euro corrected lower overnight to find support at 1.2732, the 38.2% Fibonacci retracement of the 300-pip intraday rally that took the pair as high as 1.2846 in New York hours. The pullback in the British Pound was more pronounced: sterling retraced 50% (1.4642) of the intraday rally to 1.4814 and then turned range-bound between this and the 38.2% Fib level (1.4683).
Asia Session Highlights
Australia’s AiG Performance of Construction Index dropped for the ninth consecutive month in November as a sluggish economy and scarce access to lending kept consumers away from big ticket purchases. Spreading expectations that Australia will experience recession in 2009 have seen the RBA slash interest rates by a whopping 3% since early September. That said, Reserve Bank Governor Glenn Stevens noted earlier this week that the “major easing in monetary policy…together with spending measures announced by the Government and a large fall in the Australian dollar” will support demand over the year ahead (albeit, Stevens said this as the RBA cut interest rates by another full percentage point). Still, traders continue to price 15-100 basis points in easing over the next 12 months.
Euro Session: What to Expect
The economic calendar is noticeably uneventful in European hours, with German Factory Orders the only data set to print. Expectations call for orders to lose -0.5% from the preceding month, pointing to a -11.2% decline in the year to October. This will amount to the second-worst reading ever recorded for the metric and the lowest since at least 1993. Industrial output is an important part of the Euro Zone’s largest economy, contributing over 30% to overall growth. Looking ahead, manufacturing can be expected to remain under pressure: industrial goods dominate Germany’s top export commodities and sluggish economic performance around the world is sure to trim demand. That said, some stimulus may be had from continued currency depreciation, making German goods relatively cheaper for overseas buyers. DailyFX Chief Strategist Antonio Sousa expects the Euro to continue to lose value through 2009. On balance, forex traders are likely to look past the European data docket to focus on the upcoming US Non Farm Payrolls release late into the session. US fundamentals have effectively become a proxy for the markets’ assessment of global economic prospects, with most observers now equating returning demand from the world’s largest consumer market with the first sign of recovery worldwide. To that effect, US data is also the primary force driving risk sentiment across markets. Considering both EURUSD and GBPUSD are now 94% correlated with the MSCI World Stock Index while USDJPY shows a -94% inverse correlation
source :yahoo news
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