Tuesday May 23, 2006 - 10:47:52 GMT
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Mellon Bank Foreign Exchange - https://fx.mellon.com/
Forex: Mellon FX Daily - U.S. EditionKey Points
ā¢ USD bears re-emerging, but momentum needs to be re-established.
ā¢ S&P upgrades Japan ratings outlook, although to a large extent this is old news.
ā¢ Few major releases today ā Bernanke testifies on non-policy issues, Japanese activity indices due tonight.
Yesterday was a potentially significant session, marking the first real decoupling between general USD
performance, at least against the majors, and weakness in global equity markets. This is the first sign of underlying USD bearishness once again trying to establish itself and key will be whether the market builds on this today. Indeed, it will be interesting to see how the market reacts to some evidence of stabilisation in global markets, which is already tentatively underway in Europe this morning. However, more work needs to be done to suggest a break out on the topside of the recent range. EUR-USD
remains capped by the recent high at 1.2971 and psychological resistance at 1.30 and a move above the 1.2885-1.2920 area is required to suggest that those levels could be seriously challenged. Key (MACD) momentum indicators also moved into negative territory on EUR-USD late last week and remain there for the time being, so this also raises the probability of some general consolidation (even weakness) in the short-term.
has been one of the biggest movers overnight, helped by the announcement from S&P about an upgrade to Japanās ratings outlook to positive from stable. However, in many ways, this merely reflects improvements in Japan the market is already well aware of (increased economic growth, reduction in bad loans, end of negative CPI growth). While S&P do suggest that all of the above will help Japan in addressing its huge public finance burden, they also say that high fiscal deficits will remain a constraint on ratings. 110.40-50 needs to break on USD-JPY to raise the risk of getting things moving again on the downside. Also keep an eye on 84.25 on the USD index.
ā Bernanke testifies before the Senate Banking Committee on the subject of āImproving Financial Literacy in the USā but it would be unusual for him to make any comments on policy sensitive
areas on such an occasion. The ABC weekly consumer sentiment survey is out later in the day and it will be interesting to see whether the slide of recent weeks has continued. During that time it has moved from -7 (which matched the highs seen since the beginning of 2005) to -17, the lowest since November 2005.
ā activity indices due out tonight are unlikely to significantly alter perceptions about the ongoing Japanese economic recovery. However, anything unusual may affect sentiment about future revisions to Q1 GDP.
Data/event EDT Consensus*
US Chain store sls (w/e May 20) w/w 07.45 0.0% last
US Redbook sls (w/e May 20) m/m 08.55 -2.8% last
BE Business confidence (May) 09.00 3.5
US Fedās Bernanke testifies on āimproving financial literacyā 10.30
US ABC consumer conf (w/e May 21) 17.00 -17 last
JP Tertiary index (Mar) m/m 19.50 -0.2%
JP All-industry index (Mar) m/m 19.50 -0.1%
Latest data Actual Consensus*
DE GDP (Q1) q/q +0.4% +0.4%
FR Own company ind outlook (May) +12 +14
FR Business climate indicator (May) 107 107
FR Hāhold consumption (Apr) m/m +0.7% +0.4%
IT Consumer confidence (May) 107.6 106.8
EU Manu orders (Mar) m/m -2.4% -0.7%
* Consensus unless stated
ļ2005, Mellon Financial Corporation Note: Although obtained from sources believed by us to be reliable, Mellon Financial Corporation and its affiliates cannot guarantee the accuracy or completeness of the information upon which this report is based. This report does not purport to disclose the risks or benefits of entering into particular transactions and should not be construed as advice in any specific instance. The views in this report constitute our judgement as of this date and are subject to change without notice.
Ian Gunner 44 20 7163 5996 06.40 EDT Monday May 31 2005
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