http://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/euro_open/2011/01/06/FOREX_Euro_Digests_Worst_Drop_in_Three_Weeks_Eyeing_Busy_Data_Docket.html
Key Overnight Developments
- Aussie Dollar Slumps as Currency Markets Retrace 2010 Trends
- Euro, British Pound Consolidate vs US Dollar in Overnight Trade
Critical Levels
| CCY | SUPPORT | RESISTANCE |
| EURUSD | 1.3079 | 1.3244 |
| GBPUSD | 1.5427 | 1.5604 |
The Euro and the British Pound consolidated through the overnight session, with the single currency consolidating the largest daily drop in three weeks in a narrow channel around 1.3150 while sterling tracked sideways just above the 1.55 figure. We remain short EURUSD.
Asia Session Highlights
| CCY | GMT | EVENT | ACT | EXP | PREV |
| AUD | 22:30 | AiG Performance of Service Index (DEC) | 46.4 | - | 46.2 |
| AUD | 0:30 | Building Approvals (MoM) (NOV) | -4.2% | -4.0% | 8.3% (R-) |
| AUD | 0:30 | Building Approvals (YoY) (NOV) | -9.9% | -9.8% | 3.5% (R+) |
| JPY | 2:00 | Tokyo Average Office Vacancies (DEC) | 8.91 | - | 9.0% |
The Australian Dollar fell for a fourth day, underperforming among the majors once again to slide 0.3 percent against its top counterparts. Curiously, the selloff took place against a backdrop of rising Asian stock exchanges, violating the heretofore iron-clad relationship between the high-yielding currency and risk sentiment. Indeed, the correlation between AUDUSD and the MSCI World Stock Index has dropped to just 0.5on 20-day studies, the lowest in a year.
Lingering concerns about the impact of flooding in Queensland as well as a broad correction in last year’s dominant FX trends are the stand-out catalysts behind recent losses. In fact, the worst-performing currencies to date in January were also the top gainers against the US Dollar through 2010. A soft patch in the recent set of economic data has also proved less than helpful. This time around, November’s Building Approvals report showed permits fell 9.9 percent from a year before, marking the largest annualized drawdown in 17 months.
Euro Session: What to Expect
| CCY | GMT | EVENT | EXP | PREV | IMPACT |
| CHF | 8:00 | Foreign Currency Reserves (DEC) | - | 212.4B | Low |
| CHF | 8:15 | Consumer Price Index (MoM) (DEC) | -0.1% | 0.2% | Medium |
| CHF | 8:15 | Consumer Price Index (YoY) (DEC) | 0.4% | 0.2% | Medium |
| GBP | 9:30 | Official Reserves (Changes) (DEC) | - | -$728M | Low |
| GBP | 9:30 | Purchasing Manager Index Services (DEC) | 52.8 | 53.0 | Medium |
| EUR | 10:00 | Euro-Zone Business Climate Indicator (DEC) | 1.00 | 0.96 | Low |
| EUR | 10:00 | Euro-Zone Economic Confidence (DEC) | 105.8 | 105.3 | Medium |
| EUR | 10:00 | Euro-Zone Consumer Confidence (DEC) | -10.2 | -9.4 | Medium |
| EUR | 10:00 | Euro-Zone Industrial Confidence (DEC) | 2.0 | 0.9 | Medium |
| EUR | 10:00 | Euro-Zone Services Confidence (DEC) | 10.1 | 10.2 | Low |
| EUR | 10:00 | Euro-Zone Retail Sales (MoM) (NOV) | 0.2% | 0.0% | Medium |
| EUR | 10:00 | Euro-Zone Retail Sales (YoY) (NOV) | 2.1% | 1.2% | Medium |
| EUR | 11:00 | German Factory Orders s.a. (MoM) (NOV) | 1.0% | 1.6% | Medium |
| EUR | 11:00 | German Factory Orders n.s.a. (YoY) (NOV) | 15.9% | 17.9% | Medium |
A hefty docket of Euro Zone economic data is on tap, with expectations pointing to a mixed bag of outcomes. Industrial Confidence is expected to jump to the highest in over three years, but the outcome may not prove especially market-moving with traders having already priced in a robust manufacturing sector as revised PMI figures crossed the wires earlier this week. The same likely goes for the Retail Sales report, with the expected pickup telegraphed in Bloomberg Retail PMI report released a week ago.
This puts the spotlight on timelier indicators, where expectations look far less rosy. Consumer Confidence is set to deteriorate for the first time in seven months, while German Factory Orders add 15.9 percent in the year to November to extend the slowdown noted since April. Both outcomes bode ill for economic growth in the currency bloc, especially considering the increased burden ton domestic consumption and exports to carry economic recovery amid the retrenchment in government spending brought on by the still-festering debt crisis on the region’s periphery.
Elsewhere, UK Services PMI is set to show growth in non-manufacturing industries slowed for a second month in December, slumping to the weakest since September. Finally, Switzerland’s Consumer Price Index figures are expected to see the annual inflation rate pick up to 0.4 percent in December, marking the first uptick in nine months. The outcome would put price growth at an average of 0.3 percent in the fourth quarter, a reading in line with the latest forecasts from the Swiss National Bank, cementing monetary policy firmly in place until the central bank’s next meeting in early March.
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