Tuesday May 2, 2006 - 21:30:58 GMT
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Tricom Futures and Foreign Exchange -
Forex:The USD slide to slow this week, but it's far from over
USD edged lower after retracing some gains from late Monday's rally; both the euro zone, U.K. released better-than-expected business sentiment data, helping EUR and GBP recover previous day's losses; analysts say following the knee-jerk reaction to report from CNBC, market focus has reverted back to U.S. structural imbalances.
The dollar briefly tapped a session low versus the yen at 113.09 late in New York trading on headlines taken from Cleveland Fed President Pianalto, who in a newsletter warned that for the U.S. to draw investors in, "higher interest rates on dollar denominated assets and, possibly, a decline in the spot value of the dollar will be necessary to overcome their reluctance."
The failure of the dollar to sustain gains on this movement...suggests structural concerns and relating to official views on the currency and reserve diversification continue to dominate.
The RBA is set to make an interest rate decision today, in Australia (9.30 AEST). Speculation has grown over the week that it will announce the first hike in official rates since March 2005. Signs of mounting inflation pressures in the first quarter and a view the central bank may want to get the hike out of the way before the government budget for 2006-07 next week has fueled the speculation. The official cash rate has stood at 5.50% for more than a year but Reserve Bank Governor Ian Macfarlane warned in February that risks in the economy were skewed such that it was more likely that rates will rise rather than fall.
Overnight, the AUD has rallied strongly on the back of the firmer commodities, and USD weakness. Today, i think there's a 50/50 chance of a rate hike, but i'm hoping they don't, which will see the AUD/USD come back off towards .7580, giving us a chance to get long again
With Japan closed, Bernanke speaking tonight, and then US employment out on Friday, look for the USD weakness to consolidate, and maybe even see some short-covering going into the end of the week. We may not see the EUR and GBP extending gains much further for the remainder of this week. For EUR/USD, the range looks like 1.2550-1.2650 ahead of payrolls on Friday.
Today's Economic Release:
AUS: RBA rates decision
UK: BOE meeting - Day-1, decision out tomorrow
US: Factory Orders
US: ISM - Non-manufacturing
US: Bernanke speaks - will he repeat his weekend comments and explain to the market what he really meant?
Today's Top Trades
- Sell USD/JPY around 113.40-50, with stops above 114.10
- Buy AUD/USD around 0.7580, with stops under 0.7540
- Buy EUR/USD around 1.2590, with stops under 1.2540
For more ideas send me an email, [email protected]
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