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Thursday May 11, 2006 - 09:06:27 GMT
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ACM - www.ac-markets.com
FOMC keeps possibility for next rate hike open
By Marc Spaelti - ACM Senior Trader
Yesterdays News and Events:
Currencies looked well supported going into the FOMC meeting yesterday, but the Euro-bulls wish of getting some clear sign of a pause in the FEDs tightening cycle did not materialize. Instead the FED simply added one word to its outlook that ‘some further policy may yet be needed’, leaving the possibility of another (last) rate hike open and it could come as early as June 30th.
The rate hike was followed by a lot of volatility in the Forex markets: The Euro initially dipped 40pips to 1.2750, then traded up to spike at a new high of 1.2830 only to turn and end the day at 1.2760, Cable and USDCHF did similar swings, trading at both extremes of the day in short succession. This kind of jerk reaction is a typical sign that the 1-month trend is nearing its end, breaking the bullish Euro trend in Asia only confirms this view.
ECB Liebscher again called for strong vigilance and said there were a number of upside risks to price stability, the ECB will hold their next meeting on 18 May, but without a press conference scheduled, they are expected to hike rates 2weeks later on June 8th.
Todays Key Issues:
German preliminary Q1 results revealed a 0.4% GDP growth, slightly disappointing analysts who had expected a 0.6% increase.
UK March Industrial Production at 8.30GMTought to increase by 0.2% (-0.2% in Feb) for a YoY change of +0.8%.
Euroland GDP at 9amGMT is expected to increase 0.5% in Q1, making for a yearly growth of 2%.
US April Retail Sales at 12.30GMT are forecast to increase 0.6%, weekly Jobless Claims due at the same time should drop back to 315k from 322k last week, the 4-week average stands at 314k.
US Business Inventories for March are due at 2pmGMT and should show a 0.4% increase after remaining stable in February.
The Risk Today:
1-H EURUSD: The 1-month trend-line was broken this morning at 1.2740, a test to move back into the bullish trend failed this morning in early Europe. Steep short-term bearish resistance at 1.2735, the downside should extend to 1.2675 first strong support, but we are likely to follow through to much stronger 1.2590 support, key support is a touch lower at 1.2550. A break of the current steep short-term trend can see the pair try the 1.2750 level, only a rise to close the day inside the 1-month trend keeps the pair bullish to continue its move up in search of 1.29.
1-H USDJPY: Bearish trend broken at 111.30 this morning, minor resistance at 111.50, a break there call for a 1-Yen rise to 112.50, closing the last weekend small price gap in the process. Initial support 111.20 and stronger at 111.05, while that holds the scenario is set for a correction, but a dip and low daily close is bearish, target to the downside remains 109.20, minor support at 110.85 and 110.10.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.2820 S ||1.8770 K ||112.85 S ||1.2460 K |
|1.2755 M ||1.8680 S ||112.50 K ||1.2315 S |
|1.2735 S ||1.8625 M ||111.50 M ||1.2290 M |
|1.2725 ||1.8600 ||111.30 ||1.2270 |
|1.2675 M ||1.8540 M ||111.05 M ||1.2260 K |
|1.2590 S ||1.8510 K ||110.85 S ||1.2185 M |
|1.2550 K ||1.8350 S ||109.20 K ||1.2050 K |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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