EUR/USD:1.3142/44: Nothing was done yesterday. Today we may chance 40% of equity at 1.3150-55 with a 30 pip stop for a 50-60 pip down move.

GBP/USD:1.9555/57: Yesterday we sold the GBP at 1.9545 and the profit for the same was taken at 1.9485. Today new shorts just under 1.9575 could be tried and if done, keep a 40 pip stop for a 80-100 dip again.

USD/CHF:1.2354/57: Continue the longs from 1.2350, for 50% of equity, with a 50 pip stop for a 90-100 pip upmove.

USD/JPY120.28/30: The 119.30 longs were not exited as we had planned, seeing the tenacity of the Dollar buying. Hold for a target of atleast 120.60-80.

EUR/JPY:158.11/14: We would continue to stand aside.

The dollar recovered some of its losses from the prior week. Looking ahead we have the U.S. CPI numbers. The recently reported drop in producer prices suggests that we could see a similar decline in consumer prices, especially as inflation growth slows globally. However before we even get to the US CPI release there are a number of potentially market moving events over the next few hours. This includes a testimony by RBA Governor Stevens, the Bank of Japan interest rate decision (which we elaborate on in the Yen commentary), and the minutes from the most recent Bank of England monetary policy meeting. After the CPI report, we have the release of the minutes from the Federal Reserve’s monetary policy meeting in January. This will most likely prove to be a nonevent since the minutes should contain a similar the message as the one that Bernanke delivered at his semi-testimony on the economy and monetary policy, which is that they have adopted a wait and see approach.
Elsewhere, the British pound is stronger today thanks to firm money supply and public finance data. M4 money supply grew by a healthy 13 percent in the month of January while net monthly lending hit a fresh record high. This surprising strength is a testament to the difficulty of handicapping the Bank of England’s monetary policy. Economic data is frequently mixed with a batch of weak data followed by a batch of good.
Perhaps this is why the BoE has to be so dynamic and have proven to flip their monetary policies as necessitated by the direction of economy. This is the main reason why today’s release of the MPC minutes from the monetary policy meeting held earlier this month is so important.
Meanwhile, the Yen was pushed above 120 against the dollar. The prospect of 25bp rate hike by the BOJ does not appear to concern the market. Traders believe that Japanese Central Bank will move right back to the sidelines for a considerable amount of time even it does tighten monetary policy one more time. Besides, at 50bps Japan’s interest rate is still the lowest which should keep short Yen carry trades in play by limiting Yen gain.