EUR/USD:1.3183/84: The shorts from 1.3180-85 were exited with a small profit yesterday close to 1.3150. Today we may sell only 50% of equity here in the 1.3190-00 range, with a 35 pip stop, for a 60-70 pip dip.

GBP/USD:1.9642/44: Yesterday we sold 40% of equity at 1.9640, hold the same if not exited for a 40-50 pip dip. Stops over 1.9665.

USD/CHF:1.2289/91: The longs from 1.2310-20 region, could be kept with a 50 pip stop for a 80-90 pip upmove, within the day.

USD/JPY120.40/43: The Dollar longs from the 120.80, region, could be stopped at 120.35. Wait for a spike close to 121.30 to exit the same.

EUR/JPY:158.74/76: We had sold close to 159.40 as planned yesterday, with a 40 pip stop. Take profit close to 158.40. Stop now lowered to cost.

Our action packed week begins today. We start off with the January durable goods orders report. Although a drop in Boeing orders is expected to drag total orders lower, even excluding the volatile transportation component, demand for goods made to last for more than three years is expected to drop. Taking a look back at the last three reports on orders for durable goods, the market’s reaction tends to be very volatile because of the underlying information provided by the ex transportation component. Aside from durable goods, we are also expecting consumer confidence and existing home sales. Higher oil prices over the past few weeks will probably weigh on confidence, which leaves the home sales figures as the wildcard. Recent comments from Ben Bernanke suggests that unemployment may be able to remain as low as 4.5 percent and still not induce inflation. If this is true, then the Federal Reserve may not be tempted to raise interest rates preemptively. Unless we see a meaningful pickup in the housing market, we believe that the Federal Reserve will continue to stand pat, especially as sub- prime lending market faces bigger risks.
Elsewhere, the Euro is modestly strong due to optimistic comments from ECB member Quaden who reaffirmed the central bank’s hawkish stance by saying that the “ECB has a posture of strong vigilance” and the current level of interest rates does not hamper growth or investment. The only piece of economic data released from the Eurozone yesterday was GfK consumer confidence, which dropped from an upwardly revised 4.9 to a weaker than expected 4.4.
Meanwhile, the Yen was stronger across the board thanks to hawkish comments from Cabinet Secretary Shiozaki who said that prices are “picking up.” He also indicated that the improvement in the output gap reported last time was a welcome development. For the first time in 10 years, the output gap rose by 0.6 percent. Now that the Bank of Japan has already raised rates, it is hardly surprising that the market has shrugged off the dissenting votes in favor of a rate hike at the January meeting. Any signs of strength will certainly fuel speculation for further rate hikes by the Bank of Japan.