Thursday March 17, 2005 - 10:01:35 GMT
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ACM REFCO - www.ac-markets.com
FX Daily Technical Strategy
Dollar steadies after U.S. deficit-inspired fall
The dollar stabilized against the euro on Thursday after falling nearly a cent the previous day as data showing a record U.S. current account deficit highlighted structural problems in the world's biggest economy.
Record high oil prices and falls in global stock markets following a profit warning by General Motors increased investor risk aversion, discouraging traders from taking fresh positions.
By 08h30 GMT the euro was slightly down on the day at $1.3397 having risen to $1.3438 on Wednesday. Against the yen the dollar was also slightly higher at 104.25 but within recent ranges.
Oil prices hit an all-time peak of $56.69 a barrel due to lingering supply concerns.
Tokyo stocks fell 0.82 percent, tracking Wall Street lower as GM warned that its 2005 earnings will be as much as 80 percent below its previous forecast. U.S. stock futures were pointing to a mixed start on Wall Street later.
A surge in oil prices and falling stocks pushed up the Volatility Index a gauge of investor risk aversion to its highest level since late January.
The dollar's three-year decline stemmed mainly from worries about the U.S. current account deficit but concerns that emerging central banks could diversify away from the weakening dollar also contributed.
South Korea's foreign exchange reserves, the world's fourth biggest, raised $4.66 billion in the first 15 days of March to a new record. The Bank of Korea said it planned to increase its fund management team by around a half as part of efforts to boost returns on the country's reserves.
Russia's gold and foreign exchange reserves hit yet another record high of $136.4 billion in the week to March 11.
The news from South Korea and Russia follows comments from Ukraine's economy minister Serhiy Teriokhin that his country's foreign exchange reserves should be diversified into euros. He said he wanted to swap at least 25 percent into euros.
EURO/DOLLAR: The euro is trading around the centre-point of a rising channel emerging on daily charts at the $1.3400/10 mark. The upper boundary of the pattern is impeding at $1.3580 and the lower point is $1.3220. Prices are facing an immediate resistance of a falling trend line from the last week's high at $1.3440/50 and below this barrier a gradual dip lower to $1.3370 and $1.3350/30 is in store.
STERLING/DOLLAR: Cable retreated strongly after holding $1.9130/20 support yesterday in order to cement the breakout point of a rising channel, now impeding at $1.9330. Below this resistance a gradual drop to $1.9205 and $1.9160 is on the way. Such corrective outlook is also supported by falling momentum barometer which is hovering below a rising trend line break out point.
DOLLAR/YEN: Although still bearish for an eventual test of the 101.65-80 lows, the market is still locked within the 103.60-105.20 consolidation range. Use any test of upper levels to sell against the 105.65 pivot point. Only a break of this level threatens an upside break to 107.
DOLLAR/SWISS FRANC: Although there is time for more consolidation, stay bearish for loss of 1.1475 to signal 1.1420. From there or 1.1670 downtrend should reverse.
@13h30 GMT: U.S. Weekly Jobless Claims
@15h00 GMT: U.S. February Leading Indicators
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