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Thursday June 8, 2006 - 09:26:36 GMT
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ACM - www.ac-markets.com
Will it be 25 or 50 basis points
By Marc Spaelti - ACM Senior Trader
Yesterdays News and Events:
The Euro remained locked in small range around 1.2800 before dipping to 1.2750 in early Europe. The move was driven by a still underperforming British Pound that has extended this weeks fall to a new 1-month low at 1.8470, while EURUSD and USDCHF stubbornly hold unchanged trading ranges of 1.2700/1.2950 and 1.2000/1.2260 respectively. All eyes are of course on the BOE and ECB rate announcement during Europeâ€™s lunch. US Consumer Credit rose by a much larger then expected $10.6Bln in April, the largest increase in 10months, currencies hardly reacted in a quiet New York market. FED Guynn yesterday was fairly hawkish when he said that core inflation may bypass beyond the upper end of its acceptable range. Coming just two days after Bernanke effort to sound â€˜more hawkishâ€™, it points to a continued interest rate hikes by the FED, next rate decision is on June 29th. BOJ Iwata this morning said that Japans economy was growing inline with expectations released in April. He did say that prices are likely to increase but refrained from making any hawkish comments that might suggest the BOJ could hike anytime soon.
Todays Key Issues:
UK Manufacturing Output fell 0.2%, Industrial Output fell 0.6%, this is the lower end of expectations, but since Cable has just dropped 1 cent in the early European trading hours, there were no additional sellers to be found. The BOE rate announcement will be at 11amGMT, rates are still expected to remain unchanged at 4.5% The ECB rate announcement is at 11.45GMT, they should rise 25bp to 2.75% but some hawkish analysts have been calling for a 50bp step. US Initial Claims at 12.30GMT are expected to drop 11k to 325k, due to the recent weeks high data, the 4-week average is expected to remain high around 333k. US April Wholesale Inventories are due at 2pmGMT, they are forecast to grow by 0.5% after a 0.2% increase in march.
The Risk Today:
4-H EURUSD: The 1.27/1.2960 trade range is 1-month old, the news of the ECB rate hike may have the power to see us end the consolidation phase, especially if the ECB would stand put. Short-term falling trend-line at 1.2795, while underneath expect the pair to try and push through the lows, but support at 1.2740 coupled with 1.2700 looks very strong. A rise through the short-term trend will see the pair return to the top quickly, but we doubt very much that a 25bp rate hike will be enough to lift the pair through 1.30.
4-H USDJPY: 113.40 has now been bypassed and we are trading at the next large resistance at 113.85. This weeks bullish trend has support at 113.65, while above the pair can continue to exploit the upside towards 114.65. A fall through 113.65 will test the old 113.40 key, a lower daily close should trigger a correction of the recent rise, a fall to the medium-term trend-line at 112.35 would be expected next.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.2960 K ||1.8650 P ||115.10 K ||1.2420 S |
|1.2885 S ||1.8610 M ||114.20 S ||1.2300 M |
|1.2795 T ||1.8530 S ||113.85 S ||1.2260 K |
|1.2755 ||1.8480 ||113.90 ||1.2250 |
|1.2740 K ||1.8465 S ||113.40 P ||1.2220 M |
|1.2695 S ||1.8410 K ||112.85 S ||1.2190 S |
|1.2655 S ||1.8385 S ||112.30 T ||1.2040 K |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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