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Tuesday November 28, 2006 - 10:12:10 GMT
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ACM - www.ac-markets.com
Dollar fell again on concern of unfavorable US interest rate outlook.
By Jean-Claude Braha - ACM Senior Trader
Yesterdays News and Events:
The dollar fell to a 20-month low against the Euro on Monday on additional concern that the euro-zone interest rate outlook is more favorable than that in the United States. French Finance Minister Thierry Breton said at a meeting of European finance ministers in Brussels that it was important for the euro-zone to be â€śhighly vigilantâ€ť following the dollarâ€™s recent decline. This meeting ends today. Analysts are expecting more comments from European officials trying to put some brakes on a rapid appreciation on the euro until the end of this meeting. They also said that the dollar slide will continue because we all know rates are going up in Europe. The EurUsd rallied above the psychologically important 1.3000 level on Friday in thin volume with analysts describing positive sentiment about the Euro-zoneâ€™s interest rate outlook against US interest rates and renewed concerns about diversification of Central Banks reserves away from the Dollar. Following last week rally, EurUsd went up +0.5% to 1.3158 yesterday. Also EurJpy rose to a record peak on Monday. It was up 0.5% at 152.55 high. UsdJpy was up 0.2% to 116.12 bouncing from a three-month low of 115.50. GbpUsd traded at 1.9413 high yesterday, almost up 12.5% since the beginning of the year. Early this morning, it hit a two-year peak of 1.9465 before slipping back a little. Investors are waiting for US economic date for release later this week and if there is any sign of economic softening, we could see more dollar weakness.
Todays Key Issues:
Euro-zone October M3 due at 9:00 GMT is expected 8.7% vs 8.5% (YoY) and 3 Month Average expected 8.5% vs 8.2%. US October Durable Goods Orders due at 13:30 GMT is expected -5% vs 8.3% and Durable Ex Transportation expected 0.2% vs 0.5%. US October Existing Home Sales due at 15:00 GMT is expected 6.15M vs 6.18M and -0.6% vs -1.9% (MoM). US Bernanke speaks on Economic Outlook in New York at 17:30 GMT. Fedâ€™s Moskow speaks on US Economic Outlook in Chicago at 21:30 GMT. JPY October Industrial Production due at 23:50 GMT is expected -0.4% vs -0.7% (MoM) and 5% vs 5.2% (YoY).
The Risk Today:
EurUsd maintains a positive outlook following recent gains although we continue to believe the market at these is overstretched - this raises the chances of a correction near-term to unwind this overbought intraday condition. The overall trend however remains bullish and the former breakout point of 1.2980 is likely to provide support. Continue to buy for a run at 1.3190 near-term (76.4% retracement of the 1.3663 to 1.1644 decline). UsdChf remains vulnerable following recent loss that has also resulted in a break of the former 1.2185 support. Further downside is expected with the focus now on 1.2014 ahead of the key support at 1.1920. GbpUsd maintains a firm tone following the break of the former resistance at 1.9180. This has paved the way for a climb towards 1.9550 now that the 1.9325 level has also been breached. UsdJpy Sharp losses on the back of broad USD weakness last week resulted in the confirmation of a head and shoulders reversal pattern that sets the scene for a decline towards 114.45 (50% retracement of the 108.98 to 119.90 advance).
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.3320 T ||1.9550 T ||119.90 T ||1.2583 S |
|1.3190 K ||1.9510 M ||118.60 S ||1.2346 K |
|1.3160 M ||1.9465 S ||116.60 S ||1.2185 S |
|1.3145 ||1.9447 ||116.21 ||1.2051 |
|1.3000 K ||1.9325 S ||116.06 T ||1.2014 S |
|1.2980 S ||1.9144 K ||115.61 S ||1.1948 T |
|1.2941 M ||1.9050 S ||114.45 S ||1.1920 K |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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