Monday November 7, 2005 - 11:25:04 GMT
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Mellon Bank Foreign Exchange - https://fx.mellon.com/
Forex: Mellon FX Daily - U.S. EditionKey Points
• Upside USD risk grows further, although outside chance of an initial correction today.
• 2004 low at 1.1759 is next support on EUR-USD and this needs to break to confirm likelihood of more generalised USD strength.
• Trichet due to speak as G10 spokesman.
A strong USD upmove is potentially in the works for the short-term, after Friday’s session where the USD was finally able to make a move against European currencies. The 2005 EURUSD
low at 1.1868 gave way on Friday, leaving the 1.1759 low from 2004 as the next major support level. There is a clear danger that this gives way today, but after the scale of Friday’s move, one would perhaps want to see it actually break to eliminate the risk of an initial near-term rebound attempt. Overall, the risks favour EUR-USD downside this week. If 1.1759 does break, there is every chance of a fairly sharp move lower, possibly towards 1.10 in the weeks ahead. However, ECB rate hike prospects have been progressing favourably and are supported by developments in the economic data, while a weakening EUR will further support such expectations. On this basis, there is a fair chance of any downmove stalling initially ahead of 1.15.
has also been trying to break free of prior resistance around 1.3080, but has so far failed to sustain such a move, while the USD index looks clear for a further upmove in the very short-term. The next resistance point on the latter is at 92.29, although this may not last long given the fresh build in momentum following Friday’s price action. Major support on cable
is at 1.7273 (2005 low), although the low from Oct 12 at 1.7392 is also significant. USD-JPY
could also receive fresh momentum if it can consolidate above the 117.50-80 area, although the JPY should now look better for a time on other crosses.
Other currencies like the AUD, NZD & CAD
will be vulnerable against the USD in this environment. The CAD is best supported from a fundamental perspective, with further BoC rate hikes due, but spec short USD-CAD positioning remains fairly high and there is a danger of this getting scaled back if 1.1925 gives way – above 1.1875 would be a warning sign.
manufacturing output released earlier was weaker than expected and had a modestly negative impact on GBP. Tonight sees the release of the Oct BRC survey of retail spending (which has remained weak in recent months), as well as the latest NIESR estimate of GDP. Anything unusual on the latter may have some influence on market expectations about the tone of next week’s MPC Inflation Report forecasts.
Trichet speaks in his capacity as G10 spokesman after the G10 CB meeting in Basel. He is likely to reiterate the need for CBs to be vigilant against potential inflation concerns.
Data/event EDT Consensus*
G10 Trichet press conf after CB meeting in Basel 06.45
CA Building permits (Sep) m/m 08.30 -5.0%
US Consumer credit (Sep) 15.00 +$5.9bn
GB BRC retail survey (Oct) y/y 19.01 -0.8% last
GB NIESR GDP (3mths to Oct) q/q 19.01 +0.3% last
Latest data Actual Consensus*
AU ANZ job ads (Oct) m/m +1.7% +0.2% last
CH Unemployment rate (Oct, sa) 3.7% 3.8%
NO Manu output (Sep) m/m +2.2% +2.3%
GB Ind prod (Sep) m/m +0.5% +0.7%
GB Manu output (Sep) m/m -0.3% +0.3%
EU Retail sales (Sep) m/m -0.4% -0.8%
DE Ind prod (Sep) m/m +1.2% +0.9%
* Consensus unless stated
2005, Mellon Financial Corporation Note: Although obtained from sources believed by us to be reliable, Mellon Financial Corporation and its affiliates cannot guarantee the accuracy or completeness of the information upon which this report is based. This report does not purport to disclose the risks or benefits of entering into particular transactions and should not be construed as advice in any specific instance. The views in this report constitute our judgement as of this date and are subject to change without notice.
Ian Gunner 44 20 7163 5996 06.40 EDT Monday May 31 2005
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