Wednesday December 22, 2004 - 10:53:41 GMT
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FOREX:US OPEN MARKET POINTS 12-22-04
One can almost feel the slowing pace in the currency market as the holiday season comes near, with bored dealers, absent any meaningful order flow or market moving economic news shuffling the majors through tight 50 pip ranges. The most interesting question of the day becomes – is 50 pips the extent of movement for the day?
In Japan, few surprises as Tertiary index of service industries reports the first decline in three months of –0.1%. The decrease is driven by Typhoon related slowdown in shopping and restaurant spending in November rather than any structural decline in demand. Meanwhile the Merchandise Trade Balance surplus prints as expected 990B surplus, bolstering JPY bulls case with a 13.4% jump in exports. The rise in exports is driven by demand for steel and autos from Japan’s two largest customers – US and China. If global demand continues to maintain pace, the export reliant Japanese economy should benefit substantially next quarter from the pick up and put any recessionary worries to rest.
In the Euro-zone the slightly lower than expected Current Account (1.1B versus 2.5B) has no effect on the unit as the smaller number is the result of decline in investment flows rather than trade flows. The currency may also be benefiting from the latest geo-political turmoil in Iraq after the deadliest raid on coalition forces so far left 20 Americans dead while a major US contractor announced a pull-out from the country.
As many other analysts have pointed out, euro’s refusal to correct by more than a few pennies after its recent massive rise indicates strong underlying demand for the currency. We have long argued that 1.31-1.35 box is the most likely scenario for the holidays. However, a push through the 1.3500 handle is not out of the realm of possibility in holiday thinned trading which would then see dealers gladly run the stops bunched up at that level.
FX Spot Overnight
- EUR back to 3400 awaiting US data
- JPY slides back to 104.00 after the last of major JPY releases for the week
- GBP continues to weaken on dovish MPC minutes
- CHF touches 1500 again following euro strength
- 13:30GMT – (8:30 AM EST) USD GDP Annualized (3Q F) Expected 3.9%, Previous 3.9%
- 13:30GMT – (8:30 AM EST) USD Personal Consumption (3Q F) Expected 5.1%, Previous 5.1%
- 13:30GMT – (8:30 AM EST) USD GDP Price Deflator (3Q F) Expected 1.3%, Previous 1.3%%
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