forex Markets in Consolidations, G20 Compromised

forex Markets are basically in consolidations mode as the week starts. Euro pares some of last week's gains after German Chancellor Angela Merkel's coalition lost ground in the upper house following election defeat in Hamburg on Sunday.forex  This is the first of seven state elections this year and further loss would limit her scope to tackle the European debt crisis. Meanwhile IMF Strauss-Kahn said stepped up the pressure on EU governments and urged leaders to convince investors before next month's summit. Risk appetite is also mildly softer on worry that the Middle East unrest would spread wider as Libyan leader warned of a civil war following attacks on anti-government protesters.

G20 forex  leaders compromised agreed on a list of indicators to forex  measure global imbalances, including public debt and fiscal deficits, private savings and borrowing, the trade balance and other components of balance of payments even though gold real effective exchange rate or of foreign currency reserves were dropped for China's insistence. The full sentence reads "While not targets, these indicative guidelines will be used to assess the following indicators: (i) public debt and fiscal deficits; and private savings rate and private debt (ii) forex and the external imbalance composed of the trade balance and net investment income flows and transfers, taking due consideration of exchange rate, fiscal, monetary and other policies." That's seen as a major step toward better coordination of economic policies worldwide. However, the statement was criticized as intending to appease all sides and open to interpretations. More negotiations will be carried out in the months ahead on the technical details on the measurements.

On the data front, forex UK Rightmove house price rose 3.1% mom in February. Japan all industry index dropped -0.2% mom in December. US will be on holiday today and main focus will be on Eurozone data. Preliminary reading of Eurozone PMI manufacturing and services are expected to be steady at 57 and 56 in February respectively. Germany Ifo business climate is expected to be steady at 110.4 in February too.

 forex CAD/JPY is one of the biggest winner this month, along with AUD/JPY, forex on talk of return of yen carry trade. More upside is still in favor in the cross in near term. However, we'd like to point out the price actions from August (or even from October) are looking corrective. And we believe CAD/JPY is merely in medium term consolidations. Hence, forex we'd expect strong resistance around 50% retracement of 94.46 to 78.41 at 86.43 to bring near term reversal.