Weekly Review

Risk markets' pull back was rather shallow last week with help of solid global economic data and indeed, major equity indices finally resumed recent rise after much stronger than expected employment data from US. While DOW is still limited by an intraday high made last year at 12876, the close of 12862 on Friday was the strongest close since May 2008. UK FTSE 100 hit six month high of 5901 before closing near to this level while German DAX also closed at six month high of 6766. Commodity markets were mixed. Gold pared much of the week's gain on Friday while Crude oil regained some ground following stocks. CRB commodity index jumped to close the week on 314 level. In the currency markets, dollar was mixed as it was bounded in range against European majors, strengthened against yen but weakened against commodity currencies. Nonetheless, the trend in European commodity crosses was clear as EUR/AUD and GBP/AUD dived to new lows. After some indecisive price actions, we're now back to the mode of sell European, buy AUD and NZD on risk rallies

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The non-farm payroll report from US was impressively good. Headline job growth accelerated to 243k in January comparing to expectation of 150k and prior month's 203k. The 3-month moving average is back above 200k level for the first time since April 2011. Gains were widespread with growth seen in profession and business services, manufacturing etc with government hiring the only weak spot. Unemployment rate dropped to 8.3%, lowest since February 2009. Also from US, ISM non-manufacturing index rose to 56.8 in January, best number in a year. ISM manufacturing also rose to 54.1 in January. PMI data from other countries were generally positive too. Japan Manufacturing PMI rose from to 50.7 in January. China Manufacturing PMI rose to 50.5 versus expectation of a fall to 49.6. US PMI manufacturing unexpectedly rose to 52.1. UK services PMI jumped sharply to 56.

Optimism in global economic resilience overshadowed the stalemate in Greece debt swap negotiation. Greek Finance Minister Venizelos said on Friday that "after 12 hours of tough negotiations, we have solved many issues but other crucial issues are still open." It's believed that while the deal on Private Sector Involvement is rather clear, the part on Official Sector Involvement, including ECB, is dragging the progress on. Luxembourg Prime Minister Jean-Claude Juncker said euro-area finance ministers won't meet on Monday to discuss Greece. Instead, there would be a conference call over the weekend while a meeting would be held on Wednesday.

Overall sentiments would likely remain positive in near term, possibly even for the rest of February. While DOW is still being limited by 12876 key resistance and S&P 500 below 1370.58 resistance, both indices are seen regaining momentum. Also, other markets, like UK, Germany and China, would likely catch up with US and thus, help push DOW through this mentioned 12876 key resistance. In such risk taking environment, Aussie and Kiwi would continue to benefit most. Canadian dollar will likely lag being Aussie and Kiwi a bit on relative weakness of its economic data. Outlook in European majors are still mildly bullish against dollar, but the overall picture will remain mixed until the Greece situation is cleared. So, before that, we'd continue to favor selling Europeans, buying Aussie and Kiwi

(source: actionforex).