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Friday November 10, 2006 - 10:39:04 GMT
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ACM - www.ac-markets.com
Forex market was mixed and gained volatility with decline in Trade Balance and US Consumer Confidence.
By Jean-Claude Braha - ACM Senior Trader
Yesterdays News and Events:
The Bank of England raised rate as expected to 5%, but while its statement left the door open for more rate hikes, it didnâ€™t give the strong guidance GBP bulls were waiting for. The statement was slightly less hawkish relative to the one after the August hike; at first Gbp went down against Euro and Dollar. Analysts looking closely to next week inflation report view a move to 5.25% in February as highly possible. For now ECBâ€™s rate is 3.25% but is expected an additional 25bp by the end of the year. Dollar found more support after the US Trade Deficit showed smaller data then forecast. The larger than expected decline in the trade deficit to $64.3B in September, from a record $69B, was almost entirely due to lower energy prices. The markets were expecting a more modest narrowing to $ 66B. The Dollar came again under pressure after the University of Michiganâ€™s Consumer Sentiment Survey showed a decline in the headline index and light fall in inflation expectations. It suggests that the boost from the fall in gasoline prices since the summer is now completed. The Michigan confidence index fell to 92.3 in November, from 93.6, below the consensus for no change. Over the last 2-month, it has been boosted by the sharp decline in gasoline prices, but the growing concern is the clear evidence of a slowdown in the housing market. Dollar went deeper again yesterday evening after remark from Peopleâ€™s Bank of China Governor Zhou announced that it had a clear plan to diversify its foreign exchange reserves. There is nothing new in this remark and even more; diversification of reserves does not necessarily mean a move out of the dollar assets. It might simply mean a shift away from US Treasuries into higher-yielding. Yesterday the EurGbp was us 0.5% at 0.6730 hitting one month high. It is recovering from a 15-month low at 0.6670 made last week.
Todays Key Issues:
Only announcement today is the Euro-zone OECD September leading indicators due at 11:00 GMT, previously 109.20. Forex dealers would focus on speeches from ECBâ€™s President Jean-Claude Trichet and Fedâ€™s Chairman Ben Bernanke in Frankfort on Monetarism at 13:45 GMT.
The Risk Today:
EURUSD has cleared the 1.2800 level and the fact that it has now also broken above 1.2834 (76.4% retracement of the 1.2941 to 1.2483 decline), this could pave the way for more gains towards 1.2941 trendline. Look for 1.2750 to make a new initial support. USDCHF has cleared the general 1.2400 area which marked the base of a bull channel. Within this bearish tone, could see more weakness towards 1.2290. Look for resistance to come in at 1.2525. GBPUSD is near its most important 1.9144 pivot level, which could open the way to 1.9220 next resistance. On the lower side, it would take a loss of 1.8950 to offset current bullish trend. Note that a break of 1.9144 would mark an important bullish development putting on long term target 1.9330, the March 2005 high. USDJPY pushed to 118.60 yesterday where a break is again required (118.50-118.60) to trigger a climb towards 119.90. On the contrary, the risk is for a move lower near-term support 116.60.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.2981 S ||1.9220 T ||120.00 P ||1.2800 T |
|1.2941 T ||1.9144 K ||119.90 S ||1.2707 S |
|1.2880 S ||1.9125 M ||118.50 M ||1.2525 M |
|1.2868 ||1.9101 ||117.50 ||1.2371 |
|1.2750 M ||1.8950 S ||117.25 M ||1.2290 S |
|1.2620 S ||1.8874 M ||116.60 S ||1.2230 M |
|1.2450 T ||1.8601 P ||116.06 T ||1.2185 T |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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