Tuesday April 5, 2005 - 10:24:19 GMT
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FOREX: US OPEN MARKET POINTS 04-05-05 (FXCM)
Euro and Yen Turns All Around?
Yet another night of quiet trading as the majors continue to give way against the assault of the dollar bulls. For once the data in the Euro-zone did not disappoint but simply met expectations as March Services PMI survey reported at 53 vs. expectations of 53 - still above the expansionary 50 level. Amongst the big three only France produced worse results than last month while Italy and Germany showed some improvement. In all surveys the business expectations component improved markedly, which could indicate a slight pick up in economic activity going forward. With a lean calendar out of the US for rest of the week and little prospect of any monetary policy change from Thursday’s ECB rate announcement, this type of grinding, meandering price action in the EUR/USD may continue a while longer. The dollar will gain further strength only if the market becomes convinced that the Fed is ready for a dramatic 50bp increase. Set against a disappointing NFP result and persistently higher oil prices, we believe the odds for such a move are slim at best. While the euro hardly has the momentum to stage a strong counter rally, it may muster a small retracement if the economic data does not generate any more negative surprises.
Meanwhile disappointment remains the order of the day for the yen where Household Spending declined –3.7% vs. –3.2% projected on a year over year basis. We continue to believe that Japan has few economic problems that oil below $50/bbl could not solve, yet the stickiness of crude prices has catapulted USD/JPY to a 5 month high. Nevertheless, the latest proprietary capital inflow data from Bank of New York shows a marked divergence between ever rising inflows into Japanese equities and the ever declining yen exchange rate. It is often these type of divergences that presage a turn in the FX market and USD/JPY may be setting itself up for just such a move.
FX Spot Overnight
- EUR appears to have found support at 2820
- JPY at 5 month lows trading 108.80
- GBP bounces to 8750 as eco data supportive
- CHF at 2120 encountering some resistance
- 14:00 GMT – (9:00 AM EST) USD Challenger Layoffs Mar Expected ---- Previous 108.4
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