CURRENCY PAIRS ANALYSIS: POUND EXTENDED LOSSES AGAINST THE DOLLAR

EUR/USD 
The euro edged lower against the dollar on Monday, but losses were held in check amid expectations that the Federal Reserve will maintain loose monetary policy for longer after Friday’s surprisingly weak U.S. jobs report. The report raised concerns that the Fed will adopt a more cautious approach to scaling back its stimulus program, after cutting it by USD10 billion in December, reducing it to USD75 billion-a-month. In the euro zone, data released on Monday showed that Italian industrial output rose for a third consecutive in November, up 0.3% from a month earlier. Meanwhile, Italian borrowing costs fell to the lowest level since the creation of the euro on Monday, as investors continued to regain confidence in the euro zone periphery. Italy’s treasury auctioned EUR4 billion of three-year bonds at a yield of 1.51%, down from 1.79% at a similar sale in November.

EUR/USD Hour Chart

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GBP/USD 
The pound extended losses against the U.S. dollar in subdued trade on Monday, as the greenback continued to regain ground after weakening broadly due to a disappointing U.S. employment report on Friday. The surprisingly weak data saw investors reassess expectations that the Federal Reserve would cut its stimulus program again this month. The Fed cited a stronger labor market in its decision to cut its asset purchase program by USD10 billion in December, reducing it to USD75 billion-a-month. Meanwhile, the pound remained under pressure after data on Friday showed that U.K. manufacturing and industrial production were both flat from a month earlier in November, defying expectations for a 0.4% increase in each case. The data sparked concerns that the rate of economic growth in the U.K. may have slowed in the fourth quarter, after expanding by 0.8% in the three months to September. 

GBP/USD Hour Chart

GBP/USD S&R Chart

USD/JPY 
The USD/JPY rose in the Asian trade on Tuesday ahead of the Japan’s Current Account data for November. Meanwhile on Monday the U.S. dollar traded lower against major currencies thought it narrowed its losses as investors avoided the currency after the U.S. December jobs report disappointed and rekindled expectations for the Federal Reserve to take its time dismantling stimulus programs. The Bureau of Labor Statistics on Friday reported that the U.S. economy added 74,000 jobs in December, well below expectations for a 196,000 increase and below an upwardly revised 241,000 rise the previous month. The report also showed that the U.S. unemployment rate fell to 6.7% in December due to a weak participation rate, down from 7.0% in November. Analysts had expected the rate to remain unchanged last month. 

USD/JPY Hour Chart

USD/JPY S&R Chart

USD/CAD 
The U.S. dollar eased back from four-year highs against the Canadian dollar on Monday, as the greenback’s recent strong gains prompted investors to take profits, but the downbeat outlook for the Canadian economy held losses in check. The Canadian dollar fell sharply on Friday, after an unexpectedly weak Canadian jobs report for December reinforced expectations that the Bank of Canada would stick to its dovish stance on interest rates for longer. Statistics Canada said the economy shed 45,900 jobs last month, while the unemployment rate rose to 7.2%, rising above the U.S. unemployment rate for the first time since September 2008. The surprisingly weak data overshadowed Friday’s soft U.S. nonfarm report for December. The U.S. economy added 74,000 jobs last month, the smallest increase since January 2011 and well below expectations for 196,000 new jobs. The report raised concerns that the Federal Reserve will adopt a more cautious approach to scaling back its stimulus program, after cutting it by USD10 billion in December, reducing it to USD75 billion-a-month.. 

USD/CAD Hour Chart

USD/CAD S&R Chart