Wednesday July 6, 2005 - 10:34:46 GMT
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Tricom Futures and Foreign Exchange -
Forex: The market's due for a breather, ahead of US Payrolls
A fairly uneventful session so far today, and i think this will be the case now for the next coouple of days ahead of tomorrow's ECB and BOE meetings, and Friday's US employment data. The market's not expecting any change in rates by either of the central banks, but any sort of comments after the meetings will be closely scrutinised for any hint of a rate cut in coming months. As for the payrolls on Friday, the market is starting to talk about a number between 185-200k, and looking for the USD strength to continue in coming weeks.
The AUD has been sold-off heavily over the last 24 hours, initially on the back of technicals as we broke below ..7470, and this morning on the back of fears that tomorrow's Aussie employment data will be a soft number. The Australian central bank announced no change in rates this morning, as expected. The market is looking for maybe just one more 25 bps tightening, possibly in the last quarter of this year, followed by rate cuts starting late in the first quarter of 2006.
The USD slipped off of a 14-month high against a basket of major currencies on Tuesday as investors turned more cautious ahead of the U.S. jobs report due on Friday.
Volume rose with the return of U.S. traders to the market after a long holiday weekend as investors staked out positions in advance of Friday's report, which is expected to show jobs growth of 188,500 in June compared with 78,000 in May. A strong report would, in traders' eyes, increase the odds of sustained monetary tightening by the Federal Reserve, thereby boosting the dollar's attractiveness.
Higher U.S. interest rates will mean a bigger yield advantage for dollar holders, especially against the euro, at a time when markets are pricing in the possibility of a rate cut by the European Central Bank.
U.S. Treasury debt prices fell on Tuesday following the Independence Day holiday as the Federal Reserve's resolve to keep raising interest rates at its policy meeting last week weighed on the market.
Strong manufacturing data for June released on Friday also pressured bond prices downward, though data on Tuesday showing solid factory orders in May did little to accelerate selling.
U.S. stocks climbed on Tuesday, with strong June sales from Wal-Mart Stores Inc. driving blue chips and analysts' increases in earnings estimates for Apple Computer Inc. helping Nasdaq.
Today's Economic Releases:
AUS: RBA Interest Rate Announcement
UK: Industrial Production
EMU: Trichet Speaks
Today's Top Trades
· Sell EUR/USD strength towards 1.1950-60, the 1.2000 level should cap any strength
. Buy USD/CHF around 1.3000-10
. Sell AUD/USD around .7470
For more ideas send me an email, [email protected]
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