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Thursday May 4, 2006 - 06:01:19 GMT
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ACM - www.ac-markets.com
BOE to hold rates steady
By Marc Spaelti - ACM Senior Trader
Yesterdays News and Events:
The Dollar hung on to its support levels against the major currencies, only commodity currencies such as the AUD and CAD continued rising to new peaks. We like to point to the remarkable bullish trend that the AUDUSD has seen over the course of the past 6-week, gaining 10% in value, breaking it’s long-term bearish trend at 0.75. A high of 0.7720 was seen yesterday, next long-term resistance at 0.78, there is space for a correction.
The European morning started with the euro at the highs, it was unable to break the 1.2665 level, despite March Euroland PPI that increased close to expectations by 0.4% or 5.1% YoY and supports the view of a next ECB rate hike coming sooner than the summer break. Intra-day traders then settled for a range of 1.2600/40 that held throughout the day. The rising support at 1.2600 EURUSD was only briefly scratched when US March Factory Orders reported a strong increase of 4.2% and ISM Non-Manufacturing Index climbed to a 8-month high of 63.0, later Euro short positions were closed and the day ended as a non-event.
Bank of Canada Governor Dodge is getting very verbal against the strong rise of his currency. The CAD has bypassed its 1991 high last week and reached the levels not seen since 1978. Dodge said that FX markets had a tendency to overshoot and that the most recent rise could not be attributed to fundamentals.
Todays Key Issues:
Euroland April PMI Services Survey at 8amGMT is forecast to increase by half a point to 58.7. The UK equivalent is due 30 minutes later and should be up 0.2 at 57.6.
At 9am Euroland Retail Sales for March are expected to increase 0.1% after falling 0.2% in February.
The BOE MPC meets today, rates should be maintained at 4.5%, the decision is due at 11amGMT.
At 12.30GMT US Q1 Nonfarm Productivity should rise by 2.8% (-0.5% prior) while Unit Labor Costs are expected to increase just 1.3% for the quarter after a 3.3% increase in Q4.
Weekly initial claims finally should fall back to 310k, a touch underneath of the 4-week average.
The Risk Today:
4-H EURUSD: Last time this line was broken, Mr Bernanke had a dovish speech up his sleeve to keep the Dollar descent on track. This time around again, the euro could be saved by an economic news event, otherwise it seems highly likely to get at least a pullback to the 1.25 level, the 38% return point lies at 1.2455.
1-H USDJPY: A break of the short-term trend has occurred overnight, so far it has reached May’s high above 114. We are coming from 118.50 and next large resistance area is only at 115.50 – that would be a 50% retracement – to be done in the course of the next few days. A breech of the minor rising support at 113.80 this morning, may keep the pair in a small range for a day, key support at 113.45 today.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.2715 S ||1.8590 S ||114.85 K ||1.2450 T |
|1.2665 K ||1.8475 K ||114.50 M ||1.2385 S |
|1.2635 M ||1.8430 M ||114.00 S ||1.2350 S |
|1.2625 ||1.8390 ||113.90 ||1.2340 |
|1.2595 S ||1.8375 M ||113.75 M ||1.2330 M |
|1.2500 S ||1.8285 M ||113.45 K ||1.2270 K |
|1.2485 K ||1.8215 S ||113.00 S ||1.2205 S |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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