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Monday May 8, 2006 - 08:57:01 GMT
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ACM - www.ac-markets.com
YEN rally puts BOJ on alert
By Marc Spaelti - ACM Senior Trader
Yesterdays News and Events:
The Dollar slid to new low on Friday with the Euro rising to above 1.27, comfortably maintaining the bullish trend. Cable and the Swiss Franc also reached new highs and the Japanese YEN advanced to the weeks high of 112.30.
It was the mixed employment report that caused the Dollar to loose value on Friday, Non-farm payrolls increased by 138k, this was way below expectations of 200k, the unemployment rate was unchanged at 4.7%. Hourly Earnings surged by 0.5%, annual growth stands at 3.8%, which is a big concern to the FED and could be taken as a reason to raise interest rates. The FOMC will meet on May 10th, analysts expect a 25bp hike to bring USD interest rates to 5%
Markets this morning opened with a sharp sell-off in USDJPY, the 111.55 support has been bypassed here in Europe. The move was fuelled by frustrations that China is lagging too far behind US expectations of a currency revaluation, and voices that press for some kind of economic sanction are growing louder once again.
The BOJ meanwhile has kept amazingly mum about its currency’ strong appreciation over the last few months. The Japanese Central Bank, famous for its many interventions in the past, has so far stood aside. The only way of dampening its currencies appreciation has been in talking down a possible rate hike that may be seen sometimes later this year. Japans Finance Minister Watanabe this weekend attempted to reverse the current move when he said that markets had misunderstood the April 21st G7 statement, as ‘greater flexibility did not mean a weaker US Dollar’, we see this as a very weak attempt to stem the current move, but stay prepared for more serious threats as the Dollar nears the 110 level against the YEN.
Todays Key Issues:
UK April PPI data is due shortly, PPI Input is thought to rise 0.3% after 0.6% last month, yearly growth is above 13%, PPI Output should increase by 0.3%, for a YoY change of 2.5%.
Germany March Factory Orders are due at 10am GMT, no forecast is available, they grew 0.2% previously.
The Risk Today:
1-H EURUSD: The bullish trend has held nearly a full month, outlook remains positive to reach the 1.29 level soon. Trend-line at 1.2660, minor support at 1.2715, key support underneath at 1.2530. Initial resistance at 1.2760, 1.2820 is next, target is 1.2930 this week.
Weekly USDJPY: The 50% retracement level was reached and bypassed in a hard sell-off this morning. Holding the day underneath of 111.55 is bearish, next target will be the 109.20 level, 62% retracement of the large 20-YEN move up last year. With BOJ interventions not yet a threat, the outlook for an interest rate hike sometimes this year and China-currency revaluation looming in the long-term, investors continue to add YEN.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.2900 S ||1.8850 K ||112.85 M ||1.2290 T |
|1.2860 M ||1.8775 S ||112.20 S ||1.2260 K |
|1.2820 S ||1.8690 M ||111.60 S ||1.2225 M |
|1.2775 ||1.8660 ||111.10 ||1.2210 |
|1.2715 M ||1.8620 M ||111.05 M ||1.2165 S |
|1.2660 T ||1.8585 S ||110.50 S ||1.2120 M |
|1.2530 K ||1.8510 K ||119.20 K ||1.2030 K |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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