Wednesday July 27, 2005 - 02:32:49 GMT
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Tricom Futures and Foreign Exchange -
Forex: Who will give in first - The EUR sellers, or the guys buying at 1.1980?
The USD firmed on Tuesday after China's central bank played down talk of further upward revaluation of the yuan any time soon, although gains were tempered by weaker-than-expected U.S. consumer confidence.
The People's Bank of China said foreign media reports were wrong in calling Beijing's long-awaited but modest boost to its currency last week a precursor for further appreciation. The 2.1 percent revaluation of the yuan "does not in the least imply an initial move which warrants further action in the future," China's central bank said in a statement. This encouraged investors, who had sold dollars for yen on the hope further yuan strength would spill over into other Asian currencies, to pare back their bets.
The euro was also under pressure, taken through 1.2000 support to a 1.1981 session low, before the buyers jumped in to push it back around 1.2020. The euro opened stronger this morning above 1.2000, but remains prone to further weakness.
Fairly uneventful so far today, the NZ Trade data came out worse than expected, forcing the NZD lower, and re-inforcing the belief that the NZ central bank will leave rates unchanged following Thursday's meeting. The market will be paying close attention to the bank's statement, previously they have threatened to raise rates again to stem the power of the NZ economy. However, in the last few weeks we've seen economic numbers show a slow down has begun. Elsewhere, we had Aussie CPI come out better than expected, suggesting interest rates will remain on hold here as well. Overall, when you look at it - the UK is looking to cut, the ECB is leaving rates unchanged, and maybe even cutting later in the year, Japan is also on-hold, like Australia and NZ. This then just leaves the US and Canada as the only major countries raising rates at this moment. Who wants to sell USD then??
Later today, we have US Durable goods and Beige book, which should both continue to be USD supportive. Additionally, the EUR/USD appears capped around 1.2060-80, and GBP/USD around 1.7400-20. On the USD side, I think the USD/CHF will be supported around 1.2970, and USD/CAD around 1.2270-80.
Today’s Economic Releases:
US: Durable Goods
US: Beige Book
Today’s Top Trades
· Buy AUD/NZD around 1.1110-20, ahead of tomorrow's NZ CB meeting
. Sell EUR/USD around 1.2045-55
. Buy USD/CHF around 1.2970-80
For more ideas send me an email, [email protected]
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