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Friday May 19, 2006 - 05:52:35 GMT
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ACM - www.ac-markets.com
Ending the week with a bullish Dollar bias
By Marc Spaelti - ACM Senior Trader
Yesterdays News and Events:
The Dollar trades at lower levels this morning, looking at this week’s price-action in EURUSD we can’t help noticing that each rise takes the pair to a lower high and each drop pushes the pair a little lower. We expect more of the same today, pushing for now low today.
As on Wednesday, strong UK data in form of strong retail sales data supported Cable and the other currencies followed in a steady move up. US Weekly Claims came as a big negative surprise, doubling pressure on the US currency, which continued to slide reaching a low of 1.2875 against the Euro and 1.8965 against the British Pound. The data showed a 42k jump to 367k, the 4w rose to above 330k for the first time since November, reason for the big increase is a partial government shut-down in Puerto Rico which has temporarily put 46k people on the road.
The April Philadelphia FED Index was up to 14.4 from 13.2, the improved Business Conditions Index did no more than halt the Dollar slide for a few hours, the one-way street today only ended after NY markets closed.
US Treasury Secretary chose very diplomatic wording in his testimony on China in front of the Senate Banking Committee, toning down some of the demands made by Congress. Wanting to avoid the term ‘currency manipulator’ he said ‘they’re not allowing their currency to move according to market forces’ this despite ‘having stated that they will move to a fluctuating exchange rate’. We see this as a smart change of tactics from ‘act or else…’ to ‘honor your word and act now’
St.Louis FED President Poole said that a look at upcoming data is needed to decide the FED policy. He added that inflation was tilted to the upside and a slowing US economy would not necessarily eliminate inflation risks, the odds for a new rate hike in June are slowly climbing.
The Bank of Japan decided this morning to keep interest rates at 0%, this was widely expected as analysts look to June or rather July for that historic first rate hike in nearly a decade.
Todays Key Issues:
At 6am GMT German April PPI ought to increase by a slightly faster 0.7%, it increased 5.8% YoY.
UK April Public Sector Net Borrowing is expected to fall to £0.8Bln from nearly £7Bln last month.
More important than the data today are various speeches, the first by ECB’s Liebscher at 10am and in the afternoon from 4.20GMT onwards we will hear Treasury Secretary Snow and NY FED Geithner speaking in front of the Bond Market Association.
The Risk Today:
1-H EURUSD: We’ve seen two sharp fall so far this week, its recovery has lead to successive lower tops and we are bound to drop a third time soon, expect to trade down to 1.2670 today, initial support at 1.2815. Key resistance 1.2895 but it needs a weekly close above 1.2970 to end the week inside the old bullish channel.
1-H USDJPY: A day of range-trading was sufficient to drive the pair outside of its bearish trend, key resistance remains at 111.55, a rise through that level is bullish for the 113.40 area. Strong support today at 110.45, a break through that puts our bullish view on hold and we risk a return to the 109.20 key support.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.2970 S ||1.9150 S ||113.40 K ||1.2260 K |
|1.2895 K ||1.9000 K ||112.55 S ||1.2170 M |
|1.2850 M ||1.8965 S ||111.55 K ||1.2130 P |
|1.2825 ||1.8900 ||111.00 ||1.2090 |
|1.2815 M ||1.8820 M ||110.45 P ||1.2050 K |
|1.2730 S ||1.8750 S ||110.15 M ||1.2000 S |
|1.2655 K ||1.8650 K ||109.20 K ||1.1940 S |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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