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Friday August 4, 2006 - 09:34:25 GMT
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ACM - www.ac-markets.com
Cable boosted by Rate hike
By Marc Spaelti - ACM Senior Trader
Yesterdays News and Events:
All Central Banks have raised interest rates this week. While it was not so much of a surprise to see the Australian RBA and European CB rise their key interest rates by 25bp each, currency markets have been surprised by the Bank of Englandâ€™s decision to do the same, changing their interest rates for the first time in for the first time in over one year. Naturally Cable spiked right after the announcement was made, it traded at 1.8730 before the news, 1.8850 was seen the next minute and before the day ended it had reached a high of 1.8915. EURUSD meanwhile was left unchanged and it was only 45minutes later after the ECB had made their rate decision that the pair moved up, topping at the 1.2835 level seen on Wednesday. US Weekly Jobless Claims were a touch weaker than expected and further reason to remain short US-Dollar ahead of the Unemployment report today. 315k new claims were logged the week ending July 29th, up from an upwardly revised 301k the week before, the 4-week average remains high at 313â€™750. The market will now focus on the FEDâ€™s FOMC meeting on August 8th. We tend to think that economic data is showing clear signs of an economic slow-down and rates will therefore be left at the current 5.25% level, but analysts are fairly evenly divided into a two camps with the hawks pointing to rising inflation as the key element for a hike. A look at interest rate changes over the past 18 months revels, that the USD to EUR interest rate gap is still widening, forecasts will see this spread tighten only from the in early 2007 after the ECB has done another two hikes of 25bp each.
Todays Key Issues:
German June Factory Orders at 11amGMT are believed to show a 1.4% increase, making up for loosing 1.2% in May. Key data today is the US July Employment Report at 12.30GMT. Payrolls are expected to increase by 140k, slightly better than last months 121k, the unemployment rate should remain unchanged at 4.6%.
The Risk Today:
EURUSD: Despite a rate hike, the pair has only equaled the 1.2825 high of the week. Currently at 1.2785 it can soften to 1.2740 or as low as its bullish trend-line at 1.2700 before attempting to trade higher again. Watch initial resistance at 1.2795, while underneath we have a short-term bearish bias, but a rise and retry of the 1.2825 top will be bullish towards our medium-term goal of 1.30.
4-H GBPUSD: With a high of 1.8930 the pair has pretty much exploited its upside, expect to run into very strong resistance as we approach 1.90 key resistance area. In the short-term we see a risk to correct yesterdays strong spike and trade back to 1.8800 minor support first. Risk on top is a weekly close above 1.9030 which will call for an extension to the next strong resistance at 1.9200.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.2950 K ||1.9030 S ||115.80 M ||1.2450 T |
|1.2825 S ||1.8950 K ||115.60 S ||1.2420 S |
|1.2790 M ||1.8915 M ||115.30 K ||1.2350 M |
|1.2785 ||1.8910 ||115.25 ||1.2335 |
|1.2745 M ||1.8850 M ||115.10 T ||1.2310 M |
|1.2700 T ||1.8810 T ||114.65 S ||1.2260 K |
|1.2665 K ||1.8740 S ||113.50 K ||1.2220 M |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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