The Euro moved higher last night against most of the majors as markets were encouraged by the latest headlines out of Greece. Tuesday’s meeting session for the Greek government resulted in comments that an agreement would be reached by the middle of the day on Wednesday and many traders are using this as a reason to enter into short-term buy positions in the EUR/USD. The European Central Bank will be able to give more clarification of the latest developments during its monetary policy meeting on Thursday and with a relatively light data calendar today, this is likely to be the next main source of market volatility.
In the US, consumer credit figures were released, showing a strong rise of $19 billion for the month of December, and this is continuing the trend seen in November (the largest two month rise in more than ten years). This data will have its biggest effect on the housing market, as credit demand is starting to show a real recovery and mortgage data is likely to start showing similar improvements. The JOLTS labor survey was also released and showed gains, in line with the latest Non Farm Payrolls report from the Bureau of Labor Statistics.
In the UK, BHP Billiton reported earnings yesterday, which showed that 1H profits dropped by 5.5 percent to $9.94 billion, which is the first half-year decline in three years. Rio Tinto also made headlines on reports that they plan to invest an additional $3.4 billion in its Western Australian iron ore business. In Europe, macro data will come in the form of the Swiss Unemployment Rate, German Trade Balance and the Bank of France Business Sentiment Index.
In Japan, the Nikkei 225 index is trading (1.0 percent on the session) and is now back above its psychological 9000 level for the first time since October. The gains were aided by rallies in Fujitsu, Panasonic and Renesas Electronics as merger discussions helped to encourage markets after weak current account data from the Bank of Japan. The data showed that the Japanese current account surplus for 2011 dropped to its lowest level since 1997 as a stronger Yen and post-tsunami rebuilding continues to weigh on export companies.
In the US, we will only see the latest MBA Mortgage Applications figures but earnings releases from Cisco, Visa, News Corp., Time Warner, and Prudential will be enough to bring some activity into equity markets. Yesterday, Western Union was one of the biggest movers, showing a drop of 6.6 percent in the aftermarket session after releasing a downwardly revised earnings forecast for 2011.
The GBP/USD is showing little retracement after its strong rally from below 1.53 and the bullish MACD indicator reading suggests gains have additional upside before forming a top. We will wait for prices to approach the 61.8% retracement of the daily decline before entering into short positions, as this will create overbought indicator readings and stall this latest rally.
The Nikkei 225 is continuing its strong hourly uptrend, with higher highs and lows consistently being seen and prices now seen back above psychological resistance at 9000. The break is encouraging and leads us to a buy on dips strategy, with first support coming in at 8945.