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Friday May 12, 2006 - 09:03:11 GMT
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ACM - www.ac-markets.com
Correction failed, currencies to end the week at the top
By Marc Spaelti - ACM Senior Trader
Yesterdays News and Events:
The correction was once again cut short, the Dollar was unable to cling on to gains from Wednesday night, currencies are back on track in their bullish trends. Cable ignited the days move with very high gains in Industrial Production in the month of March, lifting the YoY increase to 1.1%. Cable reacted with a rapid 150-pips rise, pulling the Euro and Swiss Franc along with it.
By the time US data hit the markets, the Euro was on the verge of breaking back into its 1-month bull-trend. Slightly disappointing Retail Sales increase of only 0.5% (below expectations) and higher Initial Claims of 324k did the rest to trigger a 2nd round of Dollar selling, carried on through the night to see the Euro rise to a new 1-year high of 1.2905 in early Europe. Cable continued to 1.8915, gaining nearly 4 cents in the past 24h, USDCHF traded at a low of 1.2040.
ECB Trichet and Hurley both spoke about the ECBs ongoing task to ensure price stability, enforcing the markets view that a rate hike in June is as good as a done deal, speculation whether the next increase will be of 50bp instead of the ‘normal’ 25bp is ongoing.
Japans vice-finance minister Hosokawa has come forward for a first verbal intervention to stem the YENs quick rise against the Dollar. None-the less, USDJPY managed to fall back to the 110 low, breaking this level for a first time this morning, strong medium-term support lies lower at 109.20. Expect the BOJ to drop more comments in the days to come, but we believe that physical intervention will not start before the pair comes closer to the 105 level.
Todays Key Issues:
Swiss KOF Business Climate Index for April is due at 9.30am GMT. It stood at 13.5 last, no forecast is available.
At 12.30GMT US March Trade Deficit is the supposed to rise by nearly $2Bln to $67.5Bln. Rising import prices are supposed to be the main driver.
The preliminary April U.Michigan Consumer Sentiment Index is due at 1.45pmGMT, it is forecast to remain unchanged at 87.4.
The Risk Today:
Weekly EURUSD: We have reached the 62% retracement point of the 2005 move, this is a major chartpoint and it will be difficult to close the week above it. Medium-term rising trend at 1.2790 this morning, initial support at 1.2850, while above and on the back of disappointing US data, the pair can extend its gains to 1.2960 today, but unless the pair pierces the 1.30 level, expect rises to be short-live and the week to close near present levels of 1.2880. Risk on the downside should be limited, expect fresh intra-day buyers to act on dips ahead of the 1.2790 trend-line, but a lower weekly close will end this 5-week run up and a 1.25/1.29 range could replace the bullish move for the rest of the month.
4H GBPUSD: 1.8510 strong support was not challenged yesterday, a piercing move bypassed the strong 1.8775 level and a high of 1.8925 traded this morning. Cable seems likely to extend its gains to above 1.90 today. Minor support 1.8835, key at 1.8775 today, buy dips while above, targeting 1.9030. Risk to the downside is limited to bullish trend-line at 1.8630.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.2300 S ||1.9030 S ||111.00 T ||1.2260 K |
|1.2965 S ||1.8985 S ||110.45 S ||1.2150 P |
|1.2915 M ||1.8930 M ||110.15 M ||1.2090 M |
|1.2890 ||1.8900 ||109.80 ||1.2050 |
|1.2850 M ||1.8835 M ||109.65 M ||1.2050 S |
|1.2790 T ||1.8775 S ||109.20 K ||1.2005 M |
|1.2720 S ||1.8660 T ||108.80 S ||1.1965 S |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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