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Monday May 29, 2006 - 05:45:05 GMT
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ACM - www.ac-markets.com
Further Dollar strength lies ahead this week
By Marc Spaelti - ACM Senior Trader
Yesterdays News and Events:
Falling tops in the currencies capped the markets on Friday, as NY entered the market the Dollar gained support and fell back to the 1.2700 level against the Euro. Cable once again proved to be more volatile with a 2-cent drop to 1.8530. USDCHF finally climbed to close the week right at the 1.2260 key level.
US Personal Spending was up the expected 0.6% outpacing Personal Income which grew by only 0.5% in April. Cause for higher spending data was an increase in prices of 0.5%, the price Index has gained 2.8% YoY, this raises inflation worries and caused haws to step in to buy Dollars.
The Dollar did not stop climbing despite a larger the expected downward revision of the May U. Michigan Consumer Sentiment to 79.1 in May.
Asked about the Dollars recent decline, San Francisco FED President Yellen said that a hypothetical decline would appear to call for tighter monetary policy, but she played down its influence on core inflation as having a one-shot impact only. We agree with her in relation to this years Dollar decline, as neither the Euro nor the JPY have reached any extraordinary high levels (yet)
ECB Garaganas repeated hawkish comments, saying that a gradual increase in interest rates is inevitable. How far and how fast was not mentioned. The market is looking for a 25 or 50bp rate hike by the ECB next week, the next round will be at the end of August at the earliest.
Todays Key Issues:
Euroland March Current Account is the only data to watch today, its due at 8am GMT. Deficit of €1.8Bln in February, no forecast available.
Markets in the UK and the US will remain closed today.
The Risk Today:
1-H EURUSD: Friday saw the pair close underneath of 1.2750, that the initial retracement of the April-May rise, we now expect to advance to the 38% retracement level at 1.2620 this week. Current formation on the 1-H charts is set to break soon, expect to fall to 1.2660 amidst an otherwise range-bound day.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.2830 T ||1.8710 K ||113.85 S ||1.2440 K |
|1.2790 S ||1.8650 M ||113.40 K ||1.2350 S |
|1.2750 M ||1.8605 S ||113.00 S ||1.2285 M |
|1.2740 ||1.8600 ||112.30 ||1.2250 |
|1.2700 S ||1.8585 M ||111.85 M ||1.2240 S |
|1.2660 S ||1.8510 S ||111.55 K ||1.2205 T |
|1.2620 K ||1.8355 K ||111.10 S ||1.2170 S |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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