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Friday June 30, 2006 - 09:19:33 GMT
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ACM - www.ac-markets.com
FED tightening cycle slows
By Marc Spaelti - ACM Senior Trader
Yesterdays News and Events:
Thursdays European session was nothing but a long wait, during which the Dollar again managed to hold its high levels, against the British Pound it even pushed for a new 2-month high of 1.8090 on a stop-run. The US FED hiked interest rates to 5.25%. As discussed earlier, this was expected and discounted in the market, but the market did not expect the accompanying statement to be dovish. Had the FOMC usually added that further steps may be needed, it toned down to a more dovish outlook to which markets reacted very strongly: The US Dollar was sold off, trading from key resistance levels to key support levels in a matter of minutes. EURUSD bypassed 1.27, Cable spiked more than 250pips to 1.8350 and USDJPY fell 2 Yen to 114.65. ECBs Trichet spoke about tight budgetary discipline and structural reforms that were essential to the euro-zone economy. He did not mention monetary policy, the ECB will be meeting on July 6th, they are believed to hold interest rates steady at 2.75%. Japan‚Äôs chief cabinet secretary Abe said that the BOJ did not owe any favors to the government and it was up to them to decide on monetary policy. He also added that he was in favor of keeping interest rates at zero-percent. We feel that the Japanese officials are doing more harm than good with their views, the longer this story makes headlines, the likelier the resignation of Fukui.
Todays Key Issues:
1st Quarter UK GDP this morning bore no surprised with an unchanged 0.7% increase, YoY it is up 2.3%. Current account deficit has narrowed to ¬£8.3Bln, Cable reacted by gaining a humble 15pips after the news. Euroland Business Climate and Consumer Confidence Indexes for June are due at 10amGMT. Business Climate is believed to decrease to .03 from 1.06, Consumer Confidence is believed to go from -9 to -8. US May Personal Income at 12.30GMT should increase by a slower 0.2% after 0.5% last month, Personal spending is believed to increase by 0.4% after 0.6% in April. The June U. Michigan Sentiment Index at 1.50pm is forecast slightly stronger at 82.6 from 82.4 last and final data today is the Chicago Purchasing Manager Index for June, released at 2pmGMT it is believed to stand at 58, down from 61.5 in May.
The Risk Today:
Daily EURUSD: The medium-term trend has held nicely, a daily close above 1.2675 is bullish Euro for next week, first target will be to trade to 1.29-ish. With the data this afternoon, intra-day volatility should pick up again. Initial support 1.2700, strong 1.2675, buy dips for a new try of the 1.2735 level, 1.2790 is next.
4-H USDJPY: The short-term trend was finally broken late last night, the sell-off reached the 114.65 key, breaking this for a low weekly (monthly) close is bearish, target of a move lower would be 110. For now the key support is still intact, short positions from yesterday should be closed here, place a new stop-entry upon breeching 114.50. To the upside it can retrace to 115.10 or even 115.60.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.2885 S ||1.8430 S ||115.95 S ||1.2500 K |
|1.2790 K ||1.8385 M ||115.50 M ||1.2425 S |
|1.2745 S ||1.8350 K ||114.95 S ||1.2370 S |
|1.2720 ||1.8320 ||114.70 ||1.2325 |
|1.2700 S ||1.8315 S ||114.65 K ||1.2305 S |
|1.2665 K ||1.8275 S ||114.30 M ||1.2260 K |
|1.2615 S ||1.7135 K ||113.85 S ||1.2200 M |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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