The begin of the Chinese New Year holiday affected the market liquidity, some market moves have been slightly overextended, Markets in China, Hong Kong, South Korea and Singapore are shut for the Lunar New Year holiday. In Japan, the central bank kept its asset-buying fund at 20 trillion yen, and its credit-lending program at 35 trillion yen. The benchmark rate was held in a range of zero to 0.1 percent. The Japan goal for balancing the budget by 2020 proposed its doubling of the sales tax, underscoring the scale of the nation’s fiscal challenges. Japan, which has enjoyed borrowing costs that are around 1 percent, wouldn’t be able to manage its finances if bond yields surged to 3 percent, the country risks seeing a spike in government bond yields unless it controls the outstanding borrowing set to approach 230 percent of gross domestic product in 2013, officials said.
The Federal Reserve begins a two-day policy meeting after which it will provide forecasts for the benchmark interest rate for the first time. The policy makers are to introduce major transparency as an innovation process with individual Federal Open Market Committee (FOMC) members providing projections of the Fed Funds rates and each to explain the quantitative factors behind the projections. It seems that investors have shunned the safety of US treasuries for a fourth straight session on hopes of deal by the Greek government is imminent. Euro-zone finance ministers agreed on the text of a treaty to create their 500 billion Euros ($651 billion) bailout fund after addressing concerns from Finland about provisions that would allow the fund to make loans without unanimous consent from the governments, The fund, dubbed the European Stability Mechanism, will have the power to make loans in emergency situations with the backing of 85% of euro-zone governments under qualified majority voting, which weights a country’s vote according to its population, This procedure will only apply when the European Central Bank and the European Commission, the European Union’s executive arm, conclude that failing to make such a loan would threaten euro-zone’s economic and financial sustainability, European officials announced.
The Foreign ministers for the 27-nation European bloc agreed to ban all new contracts to import, buy or transport Iranian crude with immediate effect, in an attempt to halt Iran’s nuclear plan. However, existing oil contracts will be allowed to continue until July 1 to give time to those countries most reliant on Iranian exports like Greece, Italy and Spain, which together buy about 450,000 barrels of oil per day. The European Union will freeze the assets in Europe of the Iranian central bank as well as eight other entities and ban the trade in gold, precious metals, diamonds and petrochemical products from Iran said in a statement yesterday. Europe is the second-biggest buyer of Iran’s oil after China. Analysts predict that China is likely to increase its purchases of Iranian oil once a full European embargo comes into force.
The Euro group officials showed optimism while other sources noted there is no willingness to give more money to Greece. As a talk of a larger firewall for the Euro area through an European Stability Mechanism (ESM) and European Financial Stability Facility (EFSF) joint bailout fund helped boost risk appetite. The Euro came on expectations that running the EFSF and the ESM in parallel may help prevent an immediate Greek led contagion spiral within the Euro zone, even if Greece’s private debt holders fail to strike a deal, which according to the officials report. Euro governments stood by an October offer of 130 billion Euros ($170 billion) for a second aid package for Greeks. Officials want to fill a deeper than expected hole in Greece’s finances by saddling investors with a lower interest rate on exchanged bonds. Greece has until February 13 to present its offer on a bond swap that would allow the country to reduce the burden of its debt. Finance ministers of the Euro zone said that negotiations between Greece and private creditors will continue with the support of the Euro group.
EUR/USD
Eur/Usd currently trading at 1.3028, slightly lower for the session, trades right underneath the opening lows at 1.3006 from where it bounced to session highs at 1.3028continued its upward movement from 1.2624 and reached as high as 1.3052. Further rise is still possible after a minor consolidation, and next target would be at 1.3200 area. Support is at 1.2875, only break below this level could signal completion of the short term uptrend. The Support levels are at 1.3006, 1.2873, 1.2834 and Resistance levels are at 1.3052, 1.3084, 1.3143.
USD/JPY
Usd/Jpy is currently trading at 77.04, The pair oscillates inside a narrow intraday range, with indicators providing to clues on the next directions, Lengthier consolidation in the range would likely be seen in a couple of days. Key resistance is at 77.32, a break above this level will confirm that the downtrend 78.21 has completed at 76.55 already, and then the following upward move could bring price to 79.00 zone. Support is at 76.55, below this level could signal resumption of the downtrend, then further decline could be seen, and the target would be at 76.00 area. The Support levels are at 76.72, 76.53 76.21 and Resistance levels 76.04, 77.34, 77.52.
