- ISM manufacturing index rises to 60.8 in January from 58.5 in December; prices paid jump to 81.5 from 72.5. Manufacturing index highest since May 2004
- Trichet: Euro area needs de facto fiscal union
- ECB fails to drain full amount of liquidity added by bond purchases, again.
- SNB’s Jordan: Strong franc threatens growth
- Irish opposition leader: Rate on bailout loan ludicrous; will go to Brussels to renegotiate
- Egypt’s Mubarak announces will not stand for re-election, to serve remainder of term through September. Protesters apparently not placated.
- S&P 500 closes at highest level since June 2008 at 1308, up 1.7%
- Oil falls 2% on hopes for peaceful power transfer in Egypt
- US 10-year note yield rises 7 bp to 3.44%; European spreads narrow dramatically
EUR/USD extended its gains through the 1.3800 area with relative ease during US trade, fueled by a suddenly voracious appetite for risk among market participants.
The Euro dipped briefly following the strongest US manufacturing data in seven years but it soon met buying in the 1.3725/30 area and sprinted through 1.38 about an hour after the data. The rally extended to 1.3843 as Mubarak made clear that he will leave voluntarily when his term ends, though that did not seem to placate Egyptians. We close the day on a very firm note, around 1.3830. Next resistance is 1.3885.
USD/JPY got a short-lived boost to 81.92 as US bond yields rose after the ISM. Large selling at the old area of support-turned-resistance at 81.90/00 soon sent the pair tumbling to 81.31 lows around midday in New York. Modest support from a trendline drawn off the 80.22 and 80.92 lows come in around 81.25.
Quien es mas macho? Cable or Aussie?
I have to give the nod to Aussie today. That sucker ripped the lips off the shorts despite a category 5 cyclone bearing down on Queensland. Macho, indeed.
It reached 1.0150 on massive short-covering after breaking recent highs in the 1.0075 area. That is now solid support on pullbacks. Interbank was very happy to fade rallies toward 1.00, until today… Record highs for copper helped set off the short-covering stampede.
Cable broke important technical resistance at 1.6020 overnight and did not quit until hitting 1.6164 as the Mubarak story began to hit the wires late in the US session. Strong buying interest from shorts is seen at 1.6070 on dips. 1.6120/25 is now support on dips intraday.