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Thursday June 1, 2006 - 09:25:14 GMT
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ACM - www.ac-markets.com
Hawkish FOMC minutes support the Dollar
By Marc Spaelti - ACM Senior Trader
Yesterdays News and Events:
The US Dollar did well in holding support levels, unable to move beyond 1.2900 the EURUSD rally was stopped mid-morning as intra-day traders turned their positions to go short currencies. While EURUSD continues to trade in a well defined range of 1.27 to 1.29, Cable again moved more than 2 cents, allowing day traders to make very nice profits.
The Dollars started moving up on the back of lower then expected UK Consumer Confidence, it fell to -5 from a revised -4 in April. The big boost for the Dollar came with a much better than expected Chicago Purchasing Managers Index, rising to 61.5 versus 57.2 in April, it was forecast to drop to 56. The FOMC minutes finally were more hawkish than expected with members actually discussing the possibility of not just the regular 25bp rate hike, but to accelerate to a 50bp rate increase instead. Analysts were quick to revise their rate forecast upwards and expectations for a rate hike in June have risen to 75%.
BOJ board member Haru this morning said that it was important to keep stimulating the Japanese economy with zero% rates, for now there was no danger of overheating. Oil prices are the greatest source of uncertainty and the impact on foreign exchange rate was one factor in considering ending the zero rate policy.
Todays Key Issues:
Euroland May Manufacturing PMI rose to 57 in May, up from 56.5 in April. The Euro climbed 30 pips to 1.2790 on the back of the news.
UK May Manufacturing PMI is due shortly, it should weaken slightly from its April level of 54.1.
Euroland preliminary Q1 GDP data is due at 9amGMT, it is forecast to have grown by 2.1%, faster then the 1.8 increase in Q4. EU unemployment rate should remain unchanged at 8.1%
At 12.30GMT US weekly Claims are expected to drop to 320k from 329k last week, the 4-week average remains at a still high 335k. US Non-farm Productivity for the 1st Quarter is expected to rise to 4.2%, up from 3.2% in Q4 while Unit Labor Costs increased by only 2%, down from 2.5% in the same time period.
US May Manufacturing ISM at 2pm is seen to shed 1.3points to 56 and finally the April Pending Home Sales are believed to drop 1% after shedding 1.2% in March.
The Risk Today:
EURUSD: 1.27 – 1.29 range continues to look strong, but we do find it rather amazing that the pair continues to exploit the full range in restless up-and-down movements for nearly 3-weeks without breaking either side. Today again strong initial support 1.2730, key 1.2700, on top initial resistance 1.2790, a break leads us back to 1.2885.
4-H USCHF: Yesterday charts got mixed-up, but the 4-H CHF chart shows how the current trading range is being followed by day-traders. This morning a quick spike saw the pair trade at a high of 1.2250, this is the key resistance area (1.2260) a daily close above it confirms that the consolidation phase is rising slowly, the Dollar should eventually make it to near 1.24, but we do not rule out a fresh dip to 1.2120 first.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.2900 K ||1.8775 P ||113.85 S ||1.2300 S |
|1.2845 S ||1.8725 S ||113.40 K ||1.2260 K |
|1.2780 T ||1.8650 T ||113.00 S ||1.2240 S |
|1.2760 ||1.8620 ||112.80 ||1.2230 |
|1.2730 S ||1.8610 M ||112.45 M ||1.2205 M |
|1.2700 K ||1.8585 S ||112.15 S ||1.2125 T |
|1.2655 S ||1.8510 K ||111.55 K ||1.2060 K |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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