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Thursday May 18, 2006 - 08:55:43 GMT
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ACM - www.ac-markets.com
Cable left the bullish trend, expect range trading to kick in
By Marc Spaelti - ACM Senior Trader
Yesterdays News and Events:
The day was again fairly volatile as the currencies tried in vain to hold on to their bullish trends and advance to new highs in European morning. Only cable managed a quick spike to 1.9025 making a new 1-year high despite a rise in unemployment, meanwhile the Euro only managed a high of 1.2900 and USDCHF firmly held the 1.2000 level. Once New York joined the market, a correction set in, driving Cable to a low of 1.8775, the Euro lost 2 cents to dip to 1.2700. The Dollar’s rise was assisted with a stronger than expected CPI rise of 0.6%. Core CPI was up 0.3%, it increased 2.3% YoY, fueling speculation that the FED will be forced to continue rising interest rates in June. This latest move from the high confirms the break of the Euro’s medium-term trend from Monday, since yesterday the GBPUSD has now also left its bullish trend. We believe that the last months Dollar decline is coming to at least a temporary end, for the next one or two weeks the currencies are expected to range-trade, top in Euro should be 1.2850ish, to the downside we can expect the pair as low as 1.2450.
USDJPY mirrored the European currencies movement, making a fresh low of 109.00 first, before turning to rise a full 2% in search of the medium-term bearish trend-line above 111. Overnight the pair fell back to 110.50 on the back of a slight rise in the May Manufacturers Tankan report.
US Treasury Secretary Snow has again voiced his concerns about China making no progress on the front of currency revaluation. Snow also said that the level of US debt was not a big concern: ‘compared to most of the rest of the countries of the world, our debt levels are low’.
Todays Key Issues:
UK Retail sales for the month of April are due at 8.30GMT, forecast to rise by a slightly slower pace of 0.5% vs. 0.7% last month.
US weekly Jobless Claims at 12.30GMT ought to fall to 319k from 324k last week, the 4-week average should increase further to 320k.
US April Leading Indicators at 2pmGMT are expected to increase by just 0.1%. An hour later the Philadelphia FED Survey for May should decline to 12 from 13.2 last month.
The Risk Today:
4-H EURUSD: The rise to 1.29 yesterday showed that the pairs rise does not have the strength to maintain the old 5-week bullish trend, a first swift correction to 1.27 has followed Going forward we expect this pair to trade sideways, 1.2650 – 1.2850 and a risk to deepen this correction next week. Currently on the rebound at 1.2775, there is a first minor resistance at 1.2780 and lots of space to move higher once broken, to the downside a first support at 1.2730, more at 1.2700, key support unchanged at 1.2655 – the line has been removed from this chart, it’s the 50% retracement level of the 1.3650 to 1.1650 fall last year.
1-H USDCHF: After holding the 1.2000 support yesterday we can draw a corrective support-line, it trades through 1.2040, this is key support for today, while above w look to correct the last months Dollar decline. Starting in range between minor support at 1.2100 and initial resistance at 1.2160, a break should be followed up by 60-100 points move, key resistance on top is 1.2260 and there is further potential to move on to 1.2330 max, that’s where the medium-tem bearish trend intersects.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.2895 K ||1.9000 K ||111.90 M ||1.2260 K |
|1.2845 M ||1.8910 S ||111.55 K ||1.2165 S |
|1.2780 S ||1.8885 S ||110.90 S ||1.2130 M |
|1.2775 ||1.8860 ||110.80 ||1.2110 |
|1.2735 S ||1.8820 M ||110.60 M ||1.2100 M |
|1.2700 M ||1.8775 S ||110.30 S ||1.2040 K |
|1.2655 K ||1.8700 S ||109.20 K ||1.2000 S |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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