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Tuesday November 21, 2006 - 09:25:09 GMT
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ACM - www.ac-markets.com
Yen weakens against high-yielding currencies after G20 finance ministers meeting.
By Jean-Claude Braha - ACM Senior Trader
Yesterdays News and Events:
The Yen fell broadly on Monday after a finance ministerâ€™s meeting over the weekend. This meeting has been seen as a disappointment as they didnâ€™t talk about a higher Japanese currency. Officials from the Group of 20 didnâ€™t comment on currency carry trades, in which investors borrow in a low-yielding currency such as the Yen to buy a higher-yielding as Dollar or Euro. The lack of position from this meeting gave more reason to investors to keep the â€ścarry-tradesâ€ť going for now. Continued weaknesses in the Yen and continued support for the Dollar are expected to be running themes this week. The G20 said on Sunday after the two-day meeting that the worldâ€™s major economies face growing inflation risks but prospects for economic growth are strong. This suggests that major Central Banks will not be cutting interest rates anytime soon. More specifically; the ECB is widely expected to raise its refinancing rate to 3.5% next month, and Japanâ€™ overnight call rate is not expected to rise before next year from actual 0.25%. Yesterday volumes were light without any important US economic data and due to the Thanksgiving holiday in the United States on Thursday. Another consistent theme this week could be how softening crude oil prices weight on the CAD despite extreme speculative positions against the Canadian Dollar.
Todays Key Issues:
EUR October German Producer Price due at 07:00 GMT is expected 0.0% vs -0.3% (MoM) and 4.4% vs 5.1% (YoY). GB October M4 Money Supply due at 09:30 GMT is expected 1% vs 1.7% (MoM) and 14.3% vs 14.5% (YoY). Are due at 13:30 GMT; CAD September Wholesale Sales expected 0.3% vs 0.5% and Wholesale Inventories expected 0.1% vs 1.2%. US October Leading Indicators due at 15:00 GMT is expected 0.2% vs 0.1%.
The Risk Today:
EurUsd choppy price action is likely to continue to dominate near-term having found support last Friday at 1.2760. A break of this support is required to open the door for further weakness and expose the support levels at stay 1.2750 and 1.2620. Strong resistance is located at 1.2901 where a break would expose the years high of 1.2981. The underlying trend remains up. UsdChf failed to go near 1.2583 and is now narrowing 1.2450 and lower. It will need to break 1.2540 to reinstate a bullish advance. Continue weakness would expose key near-term support at 1.2346. GbpUsd found support Friday at 1.8840 which now could open the door for more weakness. Initial resistance lies at 1.8970, (38.2% retracement of the 1.9182 to 1.8835 decline) has been softly broken and now expose 1.9010 (50% retracement) and 1.9050 (61.8% retracement). Global sentiment remains in a bear view; so recent advance could be seen as a correction. Key support is at 1.8840, last Friday low. USDJPY continues to consolidate, with a break of either 116.60 on the downside or 118.60 on the topside required to initiate the next strong directional move within the broader 116.06 / 119.90 range. USDCAD remains in a positive outlook with support at 1.1345. As long as this level holds, the trend remains up and focus is on 1.1500 psychological resistance and 1.1525 technical ahead of 1.1575 (76.4% retracement of the 1.1774 to 1.0929 decline).
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.2981 S ||1.9144 K ||120.00 P ||1.2707 S |
|1.2941 T ||1.9050 S ||119.90 T ||1.2583 S |
|1.2901 S ||1.9010 S ||118.60 S ||1.2540 M |
|1.2830 ||1.8980 ||118.07 ||1.2418 |
|1.2750 M ||1.8840 K ||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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