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Friday December 8, 2006 - 10:29:36 GMT
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ACM - www.ac-markets.com
Euro was steady as ECB lowered inflation forecast.
By Jean-Claude Braha - ACM Senior Trader
Yesterdays News and Events:
The European Central Bank raised interest rates by 25bp to 3.5% as expected. Mr. Trichet, ECB President, said at yesterday meeting that rates are â€ślowâ€ť and they will monitor all developments â€śvery closelyâ€ť. It lifted Euro briefly before the ECB forecast a lower inflation rates at 2% for 2007, mostly due to lower oil prices, down from previous 2.2% estimation. In addition, Mr. Trichet said investors would be â€śwrongâ€ť to assume another rate increase in February. Analysts said; â€śhe didnâ€™t give any strong of compelling signals that they are desperate to hike rates again, certainly not in Januaryâ€ť. But Investors already anticipate that the ECB would raise borrowing costs as the Federal Reserve could cut rates from the current 5.25% next year; which will erode the Dollarâ€™s yield advantage. The Bank of England held rates at 5% as expected. And last, the RBNZ held interest rates at 7.25%, but warned it may have to raise them again due to a stronger than expected domestic economy and also said it could intervene in the Forex market if is considered the currency to be â€śexceptionally and unjustifiably highâ€ť.Dealers will now focus on US payrolls report due later today. The latest poll expects to show the economy added 110K jobs last month, above 92k in October. But analysts say it would take a much bigger figure, in the 250k-300k range, to dispel the clouds that have been pressuring the dollar in recent weeks.
Todays Key Issues:
German October Industrial Production due at 11:00 GMT is expected 0.5% vs -0.3% (MoM) and 5.5% vs 6.1% (YoY). Euro-zone October OECD Leading Indicator due at 11:00 GMT was previously 109.10. CAD November Housing Starts due at 13:15 GMT is expected 218k vs 223.2k. Are due at 13:30 GMT; US November Unemployment Rate expected 4.5% vs 4.4% and Average Hourly Earnings expected 0.3% vs 0.4%. And last but not least, December (preview) University of Michigan Confidence due at 15:00 GMT is expected 92 vs 92.1.
The Risk Today:
EurUsd nearly not changed with the pair continuing to consolidate. The outlook for the Euro remains bullish however and it has potential for gains beyond Monday's 1.3364 high to pave the way for an extension towards 1.3400. Over this, we target 1.3480 key resistance ahead of the major 1.3666 all time traded high from late-December 2004. Near-term support cuts in at 1.3220. UsdChf has still potential for further near term downside with recent weakness weighting on the USD. The focus is on 1.1760 (76.4% retracement of the major rally from 1.1286 to 1.3287) and then 1.1740. Maintain a bearish bias below last Wednesday's 1.2120 high. Note however that initial resistance cuts in at 1.2009 (Dec 1 high) and this level must remain intact to avoid a test of 1.2120. GbpUsd outlook remains bullish overall. It still requires confirmation under 1.9550 to suggest a reversal is taking place. For now, a break of last Friday's 1.9850 trend high is still possible and will pave the way for a test of the psychological 2.0000 level ahead of the major resistance at 2.0100 (Sep 1992 high). Key support remains 1.9550, the former key resistance and breakout point. UsdJpy trend remains clearly bearish at this stage having tested 114.44 (50% retracement of the 108.98 to 119.90 advance). The focus now shifts to 114 and potentially 113.45 (61.8% retracement). Minor resistance is located at 115.85.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.3666 T ||2.0100 T ||119.90 T ||1.2346 K |
|1.3480 K ||1.9900 S ||118.60 S ||1.2120 S |
|1.3400 P ||1.9850 P ||116.60 S ||1.2009 M |
|1.3284 ||1.9616 ||115.34 ||1.1956 |
|1.3220 S ||1.9600 M ||114.45 S ||1.1920 P |
|1.3130 P ||1.9550 S ||114.00 S ||1.1760 S |
|1.2941 M ||1.9435 K ||113.45 T ||1.1740 S |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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