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Tuesday April 25, 2006 - 06:07:06 GMT
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ACM - www.ac-markets.com
YEN headed higher
By Marc Spaelti - ACM Senior Trader
Yesterdays News and Events:
The Dollar fell to a low of 114.25 against the Japanese currency, the breakout above 116 must be seen as significant. There are a number of reasons to buy into the Yen: The recent G7 call for currency flexibility is certainly one that will continue to weigh on the exchange rate up to the day the Chinese will act. Next is the BOJ change in monetary policy and the rising expectations of a first rate hike sometimes later this year, an increasing interest in domestic investments, mirrored by reduced capital outflows are all reasons for a sustained YEN-rise. With the break of the long-term trend-line at the 116 level, the 2005 Dollar rally has ended and the counter-movement could take the pair south of the 110 level by autumn.
The strong 0.7% rise in UK March Retail Sales was misleading, being accompanied by a downward revision of the previous 12 months, shown in a YoY rise of just 2.6%. This caused Cable to dip to 1.7790, more than enough to close the weekend-gap around 1.7825 before the Dollar came under new pressure in the US market and the day closed high at 1.7870. The Euro reached a new high of 1.2415.
ECB President Trichet in New York last night said Europeans needed to move towards greater labor market flexibility, calling it a major issue in order to reduce high European unemployment levels. Taking up the G7 subject he spoke of the US fiscal deficit as the big problem, saying that policymakers were in agreement of what needed to be done, delivering on those ideas was more problematic.
Todays Key Issues:
The German April IFO Business Climate due at 8amGMT should slow for the first time in 4 months, the Index is expected to stand at a still healthy 104.7
Euroland February Current Account is also out at 8am, after a deficit of €11.3Bln in January it should improve to a narrower deficit of €3Bln. An hour later Euroland February Trade Balance will be released, it is believed to yield a improved deficit of €4Bln after €10.8 the prior month.
US Existing Home Sales for March are out at 2pmGMT, they stood at 6.9m and are forecast to fall to 6.7m units.
The Risk Today:
4H EURUSD: After a 38% retracement a new high was seen yesterday, 10-day trend-line nearby at 1.2365, while above we remain bullish and like to see a push to 1.2485 resistance. React upon a break of 1.2350/60 with still a lot of potential to trade lower as underlying trend-line is rising only very slowly.
1H USDCHF: Redrawing the short-term bearish trend after the weekend gap was successfully closed shows a wider bearish range with immediate resistance at 1.2700 and potential to retry the 1.2650 level first thing in Europe today. A look at a medium-term chart suggests that a break at 1.2650 has room for at least 1.2560. Failure to advance on the downside today sees the pair retrace back to 1.2820.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.2480 K ||1.8000 S ||116.40 K ||1.2820 S |
|1.2450 M ||1.7935 K ||115.60 S ||1.2755 M |
|1.2410 S ||1.7900 M ||114.80 S ||1.2705 T |
|1.2385 ||1.7870 ||114.65 ||1.2695 |
|1.2365 T ||1.7840 S ||114.25 M ||1.2650 M |
|1.2320 M ||1.7800 S ||113.85 S ||1.2560 K |
|1.2280 S ||1.7770 K ||113.45 K ||1.2450 S |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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