Thursday April 27, 2006 - 22:06:50 GMT
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Tricom Futures and Foreign Exchange -
Forex: The next big test for the USD
The dollar was sharply lower late Thursday, hitting multi-month lows versus most of its counterparts after testimony from Federal Reserve Chairman Ben Bernanke signaled the Fed may look to pause its rate hike campaign. The euro gained more than 1% versus the dollar since the chairman spoke, moving from intraday lows around $1.2406 to seven-month highs at $1.2547. The greenback lost more than 1% versus the yen as well, falling more than Y1 from pre-Bernanke testimony highs at Y115.10 to three-month lows at Y113.83. The pound rallied to seven-month highs versus the greenback at $1.8046, while the Canadian dollar touched fresh 14-year highs at US$1.1222.
The dollar's decline came as the Fed chief signaled in his prepared remarks to the Congressional Joint Economic Committee in Washington that there could be an eventual pause in the Fed's nearly two-year tightening cycle. The Federal Open Market Committee is widely expected to raise official rates a 16th straight time at its May 10 meeting to 5%. That would be the second increase under Bernanke since he became chairman in February.
Although Bernanke made clear that any such pause doesn't necessarily mean an end to rate moves, the market seemed to latch onto the likelihood of a pause, and dollar selling took off. Analysts say that the comments weighed on the dollar because markets interpreted Bernanke as suggesting there could be a pause in interest rate hikes after the May FOMC meeting.
Alot of data out today in Japan and the US. The results out of Japan could set the USD/JPY on the next move lower, and set the scene for the BOJ to raise rates mid-way thru this year. While the US data could hammer another nail in the USD's coffin, ahaead of next week's employment data.
Once again, watch for the EUR/USD to crossover the USD/CHF, or atleast come close. Previously when these 2 crosses have crossed over, the EUR/USD has continued higher, and the USD/CHF has fallen away. At the moment, the EUR/USD is trading around 1.2535, and USD/CHF at 1.2595. The 1.2560 level could be where they touch and initially back-off, but if they crossover, and close with the EUR/USD above USD/CHF then lookout for further gains next week.
Today's Economic Release:
Jap: BOJ Meeting
Jap: Retail Trade
US: GDP (Q1)
US: Employment Cost Index
US: Univ. of Michigan Sentiment
US: Chicago PMI
Today's Top Trades
- Buy Gold around US$625, with stops under 620
- Buy AUD/USD around 0.7535, with stops under 0.7485
- Sell USD/CHF around 1.2640, with stops above 1.2680
For more ideas send me an email, [email protected]
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