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AUD plunged after Jobs Data; Pound Stable Ahead of Inflation Report

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A light economic calendar during the European trading hours kept the major currencies in a tight range ahead of today’s BoE Inflation Report and next week’s FOMC minutes.

The Australian dollar was the biggest loser of yesterday’s session vs US dollar. The AUD fell from 0.7730 to 0.7645 after Australia’s jobless rate rose to the highest level in almost 12 years. Unemployment rose to a higher-than-expected 6.4% in January from 6.1% in December. The market was looking for a rise to 6.2%. The number of people employed fell by 12,200 from December, compared with an expected 5,000. The AUDUSD pair had a serious dip following the employment data. After the pair reached a monthly high above the key resistance level of 0.7850, it came all the way down, breaking below some significant obstacles including the 0.7730 and 0.7680, both a key intraday levels. As mentioned in previous analysis, I remain strong bearish on this pair, with the next target now being the psychological level of 0.7300!

The EURUSD pair remained in a tight range the last couple of weeks between the key support level of 1.1500 and the strong barrier of 1.1100 following yesterday’s Eurogroup meeting. The result of the meeting was as expected; euro zone finance ministers were unable to agree with Greece on how to proceed in talks over the country’s debt crisis until their next meeting on Monday. The common currency is now trading near the 1.1300 area and is finding some resistance from the 50-period SMA on the 4-hour chart.

On the other hand, the EURGBP pair which fell on Monday, recovered somewhat and came above the psychological level of 0.7400, but was still below its Monday opening levels. The 0.7300 – 0.7400 zone it’s a significant obstacle for the bears, since it includes the 200-period SMA on the monthly timeframe as well as the lower boundary of the downward sloping channel or the return line of the falling trend line. However, I expect the price to retest the 0.7300 level before it starts the correction mode.

In other news, United States Monthly Budget Statement registered at $-18B, below expectations of $-10B in January. Also from the US, applications for US home mortgages fell 0.9% in the week ended Feb. 6, from 1.3%; there was no reaction in the market.

Today all eyes will be on the Bank of England’s Gov. Carney, which testifies to the UK Parliament’s Treasury Committee on the central bank’s February Inflation report, along with several other members of the Monetary Policy Committee.
The main event in Eurozone will be the German CPI for January. Price growth in Germany is expected to be -0.1% mom from 0.0% mom and -0.3% yoy from 0.2% yoy. German inflation remains very low, but half of German consumers nevertheless rank inflation as their biggest economic worry.

From the US, we get Retail Sales for January. Retail sales are always a useful gauge of how well the US recovery is doing, since consumer spending is such a large part of the economy. The headline figure is expected to be -0.5% mom which would be an improvement from December’s -0.9% mom. Shortly afterwards, Business Inventories for December are due to expand by 0.5% from 0.2%.

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