European sovereign debt concerns and Japanese cabinet shuffling encouraged risk aversion flows into the U.S. dollar but technical factors limited the USD upside. Fundamentals paint a mixed picture of the global recovery, leaving economists concerned whether gains will hold with stimulus winding down. Investors and traders didn’t care, and risk commodities were largely bought.

Australia’s December PMIs both declined, printing 48.5 manufacturing and 50.0 services. November retail sales surged 1.4% m/m, new home sales 0.3%, building approvals 5.9%, and the trade deficit narrowed to AU$1700Mn, with both exports and imports falling. AUD/USD gained 2.9% in the week and recovered much of its December losses, climbing as high as 0.9265 before closing at 0.9237.

Against other majors, AUD also posted significant gains, hitting a 26-month high against EUR, a 25-year high against GBP, and a 15-month high against JPY. EUR/AUD broke beneath several strong support levels, including 1.5740 and 1.5610, before closing at 1.5603.

The U.S. economy lost 85K jobs in December, with the unemployment rate holding steady at 10.0%. December PMIs printed 55.9 manufacturing, 50.1 services. November consumer credit shrank an historic US$17.5Bn, construction spending fell 0.6% m/m, and pending home sales collapsed 16.6% m/m.

Eurozone’s November unemployment reached 10.0%, and retail sales decreased −1.2% m/m, −4.0% y/y. December PMIs printed 51.6 manufacturing, 53.6 services, and 54.2 composite. The first estimate of December CPI printed 0.9% y/y, producer prices were slightly weaker than anticipated, and economic sentiment surveys improved marginally for businesses and consumers alike. EUR/USD rangetraded within late December’s boundaries of 1.4250 and 1.4450, testing but unable to break beneath its MA-200, then closing at 1.4416.

The BoE left the cash rate unchanged at 0.50% and the QE programme steady at £200Bn, as widely expected. December PMIs printed 47.1 construction, 54.1 manufacturing, and 56.8 services, while consumer confidence declined to 69 and December PPI, input, output, and core, were all stronger than forecast. GBP/USD rangetraded within late December’s boundaries of 1.5900 and 1.6200, falling and closing beneath its MA-200 at 1.6026. EUR/GBP was supported by its MA-200 as it continued trading within December’s range, as well, closing at 0.8992.

Canada’s December Ivey PMI printed 48.4. The economy lost 2.6K jobs, with the unemployment rate holding at 8.5%. USD/CAD traded lower on higher crude oil, sliding beneath 3Q2009’s support level of 1.0420 and closing at 1.0307. AUD/CAD bounced from support at 0.9365 and climbed to close at 0.9519, retracting toward the downtrend line drawn off the 6 November 2009 high of 0.9912.

New Zealand’s November trade deficit narrowed to NZ$846Mn as imports decreased substantially more than exports. NZD/USD gained 1.9% in the week, recovering all the ground lost in December and climbing as high as 0.7428 before closing at 0.7365.

Japan’s Finance Minister Fujii stepped down due to health reasons. As he was the original author of the “stronger yen” concept, this is likely to mean a shift in official governmental policy and yen depreciation. USD/JPY could not break its downtrend line nor push above its MA-200, losing 0.5% in the week and closing at 92.60. EUR/JPY gained slightly, closing at 133.50, and AUD/JPY continued pushing higher, touching a high of 86.01 before closing at 85.52.