Wednesday October 20, 2004 - 09:55:56 GMT
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Forex: US OPEN MARKET POINTS 10-20-04
Helped by much better than expected Italian Industrial Orders and Sales, the euro continued its relentless rise against the dollar in very active European session tonight. Although the market anticipated mildly positive numbers, the sheer magnitude of the increase especially on a year over year basis (9.7% vs. 4.8% expected for Industrial Orders and 11.0% vs. 4.1% for Industrial Sales) caught euro bears by surprise forcing many to cover and take out the stops above the critical 2550 option barrier. The news was even more surprising given the fact that only last week Italian Industrial Production declined the most in more than a year as oil costs crimped demand. Nevertheless, today’s data which was fueled by double digit increases in both foreign orders (10.8% y/y) and foreign sales (16.9% y/y) indicates that European manufacturing may be much stronger than market consensus.
Euro’s decisive move through the critical 1.2500 level may also force multi-nationals to restart their hedging operations. The range bound price action in the pair over the past 7 months has allowed many corporations to suspend or reduce their treasury activities as price remained relatively steady. However, if tonight’ s breakout indicates the beginning of a new euro uptrend, members of the Global 1000 such as Daimler Chrysler, Nestle, Sony and many others will be forced to buy EUR/USD to offset the currency risk from their North American profits pushing the euro higher still.
The economic news out of Japan is far more muted as Convenience Store Sales fall another –1.8% on a year over year basis indicating that Japanese consumer demand remains soft and deflation stubbornly persists. Although the yen has decoupled from its fundamentals in the last two weeks, if economic data from Japan continues to present negative surprises yen rally will run out of steam as traders will find few reasons for their bullish expectations.
FX Spot Overnight
- EUR barrels through 2550 on good eco data model fund buying
- JPY comes close to 108 but bounces on importer bids and fear of BOJ intervention
- GBP takes out 8050 stops but eco data shows serious economic slowdown
- CHF almost tags the 2200 handle as model fund buying drives the move
12:30GMT – (8:30 AM EST) CAD LEI m/m (Sep) Expected 0.4%, Previous 0.5%
12:30GMT – (8:30 AM EST) CAD Wholesales Sales m/m (Sep) Expected 0.5%, Previous 0.1%
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