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Thursday October 26, 2006 - 07:57:17 GMT
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ACM - www.ac-markets.com
Dollar fell again as Fed made softer comment on US economy.
By Jean-Claude Braha - ACM Senior Trader
Yesterdays News and Events:
The Dollar slipped yesterday after the Federal Reserve warned about the risk of inflation; but also noted that the US economy was slowing and that crude oil prices have fallen. This statement disappointed investors which had expected the Fed to take a harder line against inflation. As widely expected, the FOMC kept the Fed funds at 5.25% for the third consecutive meeting. In addition, the Fed comment provided little support for the view that US interest rates would rise further. In the last two weeks, analyst have been hesitating from a small chance of a cut in US rates early next year to a small chance of a rate rise. First, with little reaction after the meeting, investors have done some technical buying on EurJpy which stimulated buying in Euro against Dollar. In late US session, EurUsd was 1.2610, up 0.4% on the day and only 0.2% from 1.2580 level before the Fed released its rate decision. The dollar dropped 0.4% against the Yen at 118.90 from intraday 119.35 high. The dollar rose against New Zealand Dollar after the RBNZ kept interest rates unchanged at 7.25%. The NZD went sharply lower even as the Central Bank said is may need to tighten again to control inflationary pressures.
Todays Key Issues:
US September Durable Good Orders due at 12:30 GMT is expected 1.9% vs -0.5% and ex-transportation 1% vs -2%. CAD October Business Condition Orders due at 12:30 GMT is expected -1% vs 4%. US September New Home Sales due at 14:00 GMT is expected 1â€™050K unchanged (previous month was up 4.1%). NZD September Trade Balance due at 21:45 GMT expected -850M vs -961M.
The Risk Today:
EURUSD extended the previous day's recovery from 1.2525 on Wednesday, but so far it is holding below resistance 1.2660. Only a move above this resistance would open the door for run to 1.2700 and 12880. USDCHF continues to correct the rally from 1.2550 to 1.2707, with initial support at 1.2605 (61.8% retracement). But its overall favorable tone will remain intact as long as support from last Thursday's 1.2550 low holds. On the top side, focus remains on the 1.2743 and 1.2770 short term resistances. GBPUSD partly recovered from recent lows and remains below resistance at 1.8860, and only a move above there would put it out of this down trend. A break of the Oct 18 reaction low at 1.8660 and then 1.8650 (61.8% retracement of the 1.8516-1.8863 rise) would be the first sign of the bear's return, clearing the way for a run at 1.8516. USDJPY's recent pullback from Tuesday's 119.67 high has shown little power and held above minor support at 118.66.But as long as last Thursday's 118.05 low holds, we can still hope for a run back at 119.90.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.2880 K ||1.9075 T ||121.40 T ||1.2930 T |
|1.2700 S ||1.8901 S ||120.00 P ||1.2800 P |
|1.2660 M ||1.8860 S ||119.90 S ||1.2736 S |
|1.2630 ||1.8805 ||118.85 ||1.2615 |
|1.2485 M ||1.8660 M ||118.05 M ||1.2605 M |
|1.2450 T ||1.8601 P ||117.40 S ||1.2550 S |
|1.2400 S ||1.8516 K ||116.06 T ||1.2400 K |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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