Focus now shifts to the second ever Long Term Financing Operation (LTRO) that will be carried out by the European Central Bank on Wednesday. The first LTRO was a success and the ECB has been credited for preventing a credit freeze in European financial markets. Markets are now anxiously waiting for the outcome of the second LTRO. If the auction is deemed successful, we might see a rally in the EURUSD towards 1.3500. The credit rating agency Standard and Poor’s downgraded Greece to selective default because of collective action clauses recently added to debt agreements. Greece previously had a CC long term rating. Standard and Poor’s in a statement said that the retroactive changes to debt agreements constitutes debt restructuring by Greece. Greece was also downgraded by the rating agency Fitch last week. The S&P also revised its rating on EFSF to negative outlook. Germany voted yesterday to approve the second Greek bailout package. The risk rally from the vote in the Bundestag was limited during the previous trading session. The EURUSD dipped as low as 1.3380 in the previous trading day before retracing towards 1.3450. Support for the EURUSD is seen at 1.3200 and resistance is seen at 1.3500. The Inside View indicator on HotForex shows that 68% of traders are short on the EURUSD.
The United States Pending Home Sales report for month of January beat analyst expectations when it showed a rise of 2%. The U.S. housing market generally seems to be experiencing a comeback albeit a slow one. While analysts are not expecting much positive news from the S&P Case Shiller index report today, it will boost confidence in the housing market if the data beats expectations. The Core durable goods orders is expected to remain flat and the Richmond manufacturing index is expected to show a decline. While the U.S. will release several economic reports we expect their impact to be muted on the U.S. Dollar due to the focus on the second LTRO to be held tomorrow. Support for the USA30 is seen at 12,850 and resistance is seen at 13,100.
Australia will release the January retail sales report which is expected to show a growth of 0.3%. The retail reports have been disappointing in the last few months with flat growth in December and a -0.1% drop in November. The AUDUSD gained over 100 pips in yesterday’s trading after the confirmation of Prime Minister Julia Gillard as the head of the Australian labor party. Support for the AUDUSD is seen at 1.0650 and resistance is seen at 1.0810. The Inside View indicator on HotForex shows that 74% of traders are short on the AUDUSD.
Japanese retail sales data surprised to the upside with a 4.1% m/m and 1.9% y/y growth in the month of January. The USDJPY has surprised us and most other trades as the pair climbed above 81.00 for the first time since July 2011. The Japanese government has denied that it has been intervened in the markets to make the Yen weaker. Support for the USDJPY is seen at 77.60 and resistance is seen at 81.30. The Inside View indicator on HotForex shows that 84% of traders are long on the USDJPY.