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Wednesday September 27, 2006 - 10:28:16 GMT
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ACM - www.ac-markets.com
Markets move sideways
By Stéphane Marie - ACM Senior Trader
Yesterdays News and Events:
The dollar rose on Tuesday after a surprisingly strong reading in U.S. consumer confidence data softened speculation that a slowing economy may lead the Federal Reserve to cut interest rates. The dollar rallied for a second straight session after the Conference Board said its index of consumer sentiment climbed in September. A stronger than expected reading from Richmond Fedâ€™s composite index also helped the dollar. Given signs of a rapidly cooling housing market, many analysts think the fed will be forced to cut rates in 2007, but some say that if economic data keeps beating expectations, investors may have to rethink their widespread view that the Fedâ€™s next rate move is likely to be down, not up.
The biggest mover of the session was the New Zealand dollar, which fell sharply after finance Minister Michael Cullen suggested in an interview with Bloomberg that the countryâ€™s central Bank would not raise interest rates again. The Kiwi was down 1.6% at $0.6685, its biggest daily percentage fall in three months.
Todays Key Issues:
GB Q2 final Q2 GDP @ 09h30 BST.
GB September CBI Distributive Trade Survey @ 11h00 BST.
US August Durable Goods orders.
US August New home sales.
The Risk Today:
With the market fixated on interest rates, dealers said the main focus would be on whether upcoming U.S. data suggests that the Fed will need to lower its key rate from 5.25%. This could compromise the dollarâ€™s yield advantage over the euro, whose rate is at 3% and expected to climb to at least 3.5%. But no matter the direction of U.S. and euro rates, the market is confident the currencies of both regions will continue to overshadow the 0.25% offered in Japan for some times. The Bank of Japan is expected to boost rates slowly after lifting them in July for the first time in six years, keeping the low yielding yen as an unattractive option. Dealers were awaiting Japanese data on consumer prices and industrial output due on Friday for a better idea of when the Bank of Japan will next raise rates. Fridayâ€™s figures will lead up to the BOJâ€™s much awaited tankan survey of business sentiment due on Monday.
The U.S. consumer confidence data precedes a series of big economic data releases this week, which includes durable goods orders on Wednesday and the Personal Consumption Expenditure index, the Fedâ€™s preferred gauge of inflation, on Friday. But given the volatility of the monthly orders data, it would take a fairly major surprise today to trigger a substantial market reaction.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.2880 K ||1.9219 S ||118.30 T ||1.2625 S |
|1.2834 S ||1.9146 T ||117.77 S ||1.2545 T |
|1.2763 M ||1.9094 M ||117.49 P ||1.2497 M |
|1.2686 ||1.8875 ||117.20 ||1.2445 |
|1.2630 S ||1.8863 M ||116.06 T ||1.2368 T |
|1.2570 K ||1.8797 S ||115.56 S ||1.2287 S |
|1.2559 M ||1.8750 K ||115.18 K ||1.2274 K |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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