Share This Story
Foreign Exchange Research - Euro Passes G7 Obstacle, Eyes at $1.5930
Dollar weakness resumes
after a brief interruption following a G7 statement that was largely
inconsequential. The G7 communique on foreign exchange omitted its long
standing statement urging the need for markets to reflect fundamentals, and
shifted towards expressing concerns about â€śsharp fluctuations in major
currenciesâ€ť, which is a clear reference to the falling dollar. But the shift in
language towards apprehension about excessive currency moves was as promiscuous
as the G7â€™unwillingness to engage in coordinated intervention to support the
falling dollar, which is seen as the only viable means of any dollar support.
The euro is now surging to session highs at $1.5841 after ECBâ€™s Yves Mersch
said indicated there was no room for interest rate cuts in 2008. The dollarâ€™s
woes are compounded by not only the ECBâ€™s renewed commitment to fight inflation
(and dampening any prospects of a rate cut) but also by the fact that the U.S.
recession is being complemented by an earnings recession as the season is being
kicked off by an earnings miss and negative guidance from General Electric. The
latest negative releases came from Wachovia, as the U.S. fourth largest bank reported a surprise Q4 loss and
a 41% reduction in its dividend.
Trading focus shifts to the US macro picture as retail sales are seen flat in March
following a 0.6% decline in February, while core sales â€“excluding autosâ€”are
expected to have risen 0.2% following a 0.2% decline. The rest of the week will
bring key reports; industrial production, consumer inflation, Fedâ€™s beige Book,
housing starts/building permit and the Philadelphia Fed survey.
Euro Passes G7 Obstacle, Eyes at $1.5930
The euro is being bid up across the board on a
combination of broad USD weakness and the ECBâ€™s reiteration that inflation
remains its policy priority. The fact that the ECB has not retreated an inch of
ground from its price stability stance at the G7 as a possible way to ease its
recent strength is adding to the currencyâ€™s strength across the board. The
other side of the EURUSD coin has been fortified by US earnings, where
â€śearnings and warningsâ€ť may set to be giving a double punch to the greenback,
and reduce risk appetite across the board.
A positive surprise in US retail sales may have to come in at nearly 0.4-0.5%
in both the headline and the core for the euro to encounter pressure at the
$1.5925-30 resistance. But support has firmly risen to $1.5780 and 1.5740.
Euro focus turns to Tuesdayâ€™s ZEW survey for
the latest on German investor sentiment, which has held up spectacularly in the
face of the current credit crisis.
the 80 pence barrier but is unlikely to breach above 0.8025 in the session
following todayâ€™s record 20.4% annual jump in March PPI following a 10.9% in
February. Support is expected to hold at the key trend line of 0.7920 at which
point substantial interests in seen in the single currency.
Yen Uptrend Intact
Yenâ€™s uptrend remains intact against all the
major currencies, with USDJPY, AUDJOY, GBPJPY and EURJPY facing increasingly
adverse conditions on the technical set up. Yen fundamentals remain boosted by
the repetitive failure of US equity indices to breach above their 1,380 and
12,770 barriers in the S&P500 and the Dow. Fridayâ€™s GE earnings has
bolstered the case for yen bulls, rendering the 100.30 as the main short term
objective, a breach of which is expected to encounter support at 100.00. Upside
remains at 101.70, followed by 101.
AUDJPY and CADJPY are also seen extending losses in the event of a
negative US retail sales reading, with AUDJPY capped at 93.40, eyeing 92.40 and
CADJPY to target 97.70 and 97.40. Resistance stands at 97.45-50.
Sterlingâ€™s Propped by 20.4% PPI Rise, Seen
We do not considersterlingâ€™s
gains on the back of todayâ€™s record 20.4% annual jump in March PPI as a long
term positive for the currency, considering the need for the Bank of England to
further cut interest rates to tackle the deepening slowdown in housing,
manufacturing, consumer demand and credit market uncertainty. Tuesdayâ€™s release
of UK march CPI is seen up 2.6% from 2.5%, which would be
another positive element for the currency, but also as an opportunity for
shorts to reenter the fray.
Upside momentum is seen extending at $1.9920, a
breach of which is unlikely. Subsequent resistance stands at 1.9950. Support
starts at 1.9820, backed by 19750.
Offices: London - New York - Sydney - Beijing - Hong Kong - Frankfurt - Toronto
Head Office: CMC Markets UK Plc 66 Prescot Street London E1 8HG United Kingdom
Registered in England: 02448409 / 02589529 Regulated: UK - FSA; USA - NFA;
Australia - ASIC; China - CBRC; Hong Kong - SFC; Germany - BAFIN; Canada - OSC
All information contained within this email,
and any attachments, are subject to CMC Markets standard Terms and Conditions -
which can be found at: http://www.cmcmarkets.com
This email and any attachments, which may only be used by the intended
recipients, are confidential and may contain proprietary information,
some or all of which may be legally privileged. Unauthorised disclosure,
copying or distribution of this mail or its contents is strictly prohibited.
Should you have received this email in error please immediately return it to
the sender or notify the company at email@example.com, then delete the
email and any attachments from your system.
CMC Markets UK Plc takes every effort to ensure that our systems are regularly
scanned for viruses and other infections with updated programs, but cannot
guarantee emails sent have not become infected elsewhere, we advise recipients
to conduct their own checks as considered appropriate.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."