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Friday November 17, 2006 - 10:42:56 GMT
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ACM - www.ac-markets.com
Dollar edges higher even as inflation softens
By Jean-Claude Braha - ACM Senior Trader
Yesterdays News and Events:
The Dollar edged up against European currencies on Thursday after US inflation and data releases confirming the view that US growth and inflation were easing at a moderate pace. US headline CPI fell by -0.5% (MoM), consensus was -0.3%, for a second consecutive month according with further declines in energy prices. Core CPI increased by 0.1% which transferred attention to the annual inflation rate which fell to only 1.3% (YoY). The Core CPI rate remains significantly higher at 2.7%, that still represents moderation from the high 2.9% reached in September. Overall these figures obviously add to the sentiment that the Fed is now very unlikely to return to raising rates and could even begin cutting rates next year if the better news on inflation continues. The increase in the Philly Fed index to 5.1 in November from -0.7 seems to support the idea that conditions in the manufacturing sector are improving. However it is in contrast with other indexes in the survey; New Order fell to a 3 Â½ year low of -3.7 from 13.4, the employment index fell to a 3 year 0.2 from 9.4. With all those sub-indexes in the same way and a closer watch ISM manufacturing survey suggests that the latter index will fall to just over 50 in November from 51.9.
Todays Key Issues:
Euro-zone September Trade Balance due at 10:00 GMT is expected between -4.5B to 0B vs -5.8B. Are due at 13:30 GTM; US October housing Starts expected 1690k vs 1772k and US October Building Permits expected 1625k vs 1638k.
The Risk Today:
EurUsd remains under near-term pressure, however weakness below 1.2750 would be necessary to go lower at 1.2680 and target 1.2620. On the other hand, we maintain a cautiously bullish medium term trend and look for extended gains over 1.2901, which would trigger further upside towards the 1.2981. UsdChf is still vulnerable below 1.2583 (6 Nov high). This level will continue to cap the topside. On the down side, 1.2346 could be tested at any time. GbpUsd remains under pressure following Tuesday's break of the 1.8950 level. While Thursday's bounce is view as small correction, the Sterling would need to go above 1.8950 to relieve the immediate bearish tone. Otherwise, we could see more weakness below Wednesday's 1.8840, this would expose further downside towards 1.8770 (61.8% retracement of the 1.8516 to 1.9182). USDJPY continues to consolidate, with a break of either 116.60 on the downside or 118.50 on the topside required to initiate the next meaningful directional move within the broader band 116.06 / 119.90.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.2981 S ||1.9220 T ||120.00 P ||1.2707 S |
|1.2941 T ||1.9144 K ||119.90 T ||1.2583 S |
|1.2901 S ||1.8950 S ||118.50 S ||1.2525 M |
|1.2782 ||1.8851 ||118.31 ||1.2500 |
|1.2750 M ||1.8840 M ||117.25 M ||1.2346 M |
|1.2620 S ||1.8770 S ||116.60 S ||1.2290 S |
|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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Amazing Trader EVENT RISK Calendar:
Mon 18 Dec
10:00 EZ- final HICP
Tue 19 Dec
09:00 DE- IFO Survey
13:30 US- Housing Starts/Permits
13:30 US- Current Account
Wed 20 Dec
15:00 US- Existing Homes Sales
15:30 US- EIA Crude
Thu 21 Dec
03:00 JP- BOJ Decision
13:30 CA- CPI & Retail Sales
13:30 US Weely Jobless
13:30 US- GDP
Fri 22 Dec
09:30 US- GB- GDP
13:30 US- core PCE Deflator & Presonal Income
15:00 US- New Homes Sales
15:00 US- final University of Michigan
17:00 US- early Closes
Mon 25 Dec
00:00 Christmas Holidays
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- POTENTIAL PRICE RISK: Medium Mon--10:00 GMT-- EZ- final November HICP. flash data are rarely changed.
- POTENTIAL PRICE RISK: HIGH- Medium Tue --09:00 GMT-- DE- IFO Survey. Key report but usually not a market-mover
- POTENTIAL PRICE RISK: HIGH- Medium- Tue --13:30 GMT-- US- Housing Starts and Permits. Leading indicators of activity
- POTENTIAL PRICE RISK: HIGH-Medium- Wed --15:00-- US- Existing Homes Sales. Top Housing statistic
- POTENTIAL PRICE RISK: Medium- Wed --15:30-- US- EIA Crude
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