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Wednesday May 31, 2006 - 09:28:43 GMT
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ACM - www.ac-markets.com
Consolidation phase is ending as the Dollar slides
By Marc Spaelti - ACM Senior Trader
Yesterdays News and Events:
For a while it looked like the Dollar was successfully defending support levels as it made small progress in the European morning. With the release of US May Consumer Confidence at 103.2, down less then expected, markets suddenly turned volatile, pounding the Dollar. EURUSD climbed to 1.2910, Cable rose to 1.8870, with currencies closing the day very high it looks like the 2-week consolidation phase is coming to an end and the Dollar is at risk of falling back to the years low from here.
Treasury Secretary John Snow has announced that he is stepping down next month, after rumors of his departure have been circulating for a while now. Henry Paulson, chairman at Goldman Sachs, was nominated as his successor, politicians from both camps seemed to be satisfied with the choice and congressional approval should only be a formality.
Two sets of hawkish ECB comments with Irelands Hurley saying that interest rates will rise further while growth prospect were good. Asked on the impact of forex movements, he said that they were not good for business and did slow economic growth (in the near-term). ECB Almunia repeated that rising interest rates from the current historic low levels would not slow down economic growth.
Todays Key Issues:
Euroland May Business Climate and Consumer Confidence are due at 9amGMT. Consumer Confidence Index last stood at 10, it is believed to rise slightly to -9, Industrial Confidence at +1 in April should fall to 0.
UK May Consumer Confidence Index at 9.30GMT is expected to remain unchanged at -4.
Swiss May KOF Leading Indicator also at 9.30am are forecast to increase to 2.1 from 2.03 last month, the Business Climate Index ought to drop to 17.6 from 18.7.
At 3pm US Chicago PMI is expected to drop to 56 from 57.2 in April.
FOMC minutes of the May 10th meeting are due at 6pm GMT.
The Risk Today:
EURUSD: Instead of breaking to the downside through 1.2700 at the beginning of the week, EURUSD has risen through the past 2-weeks bearish resistance and moved up to 1.29. Of course it is possible to remain range-bound between 1.2720 and 1.2920 for the rest of the week, but hopes of a deeper correction towards 1.25 have to be shelved for now. Risk is for the Euro to trade back up to the 1.2960 top seen in May 11th, a high daily close should build enough momentum to drive the pair through 1.30, next large resistance area will be at 1.3130. Today initial support at 1.2850, pivot at 1.2800 for a fall back to key-support near 1.27.
4-H USCHF: It does not yet look too bearish, the return from the 1.2260 key seems to be holding here around 1.21ish. Watch the daily close tonight, a close underneath of the 1.21 support is bearish, a fall to 1.2020 minimum is expected, 1.1960 likely. But while it holds, the pair may rise and try the 1.2260 level again, strong resistance at 1.2185 on the way up.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.2965 S ||1.9000 K ||113.00 S ||1.2260 K |
|1.2920 M ||1.8885 S ||112.35 M ||1.2175 S |
|1.2900 S ||1.8850 M ||112.00 S ||1.2115 S |
|1.2870 ||1.8810 ||111.80 ||1.2100 |
|1.2850 M ||1.8795 M ||111.55 K ||1.2065 M |
|1.2800 P ||1.8775 P ||111.15 M ||1.2020 T |
|1.2700 K ||1.8585 S ||110.50 S ||1.1945 K |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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