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Monday December 11, 2006 - 10:29:19 GMT
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ACM - www.ac-markets.com
Dollar rallied sharply on Friday volatile market.
By Jean-Claude Braha - ACM Senior Trader
Yesterdays News and Events:
The Dollar rallied sharply on Friday as a mix of technical positioning, solid US jobs data and the US treasury Secretary‚Äôs comments on the Chinese Yuan led to a volatile market. The 132,000 increase in US non-farm payrolls in November was modestly above the consensus forecast at 100,000. The markets may have been expecting a slightly higher figure after the more upbeat ADP survey released earlier this week, however. The unemployment rate increased slightly to 4.5%, from 4.4%, but is still low enough to worry the Fed. The drop back in the University of Michigan measure of US consumer confidence, to 90.2 in December from 92.1, is an illustration that the boost from the recent declines in energy prices is already fading. The market will now focus on Tuesday FOMC meeting where the Fed is expected to keep its tightening politic. The Dollar turned stronger when US Treasury Secretary Henry Paulson told CMBC that China needs more foreign exchange flexibility and called for a stronger Yuan. The Dollar came out from a 2-week weakness trend which was lead by the view that slower US growth is likely to push the Fed to cut interest rates in early 2007 even as the ECB and other Central Banks would push rates higher. EurUsd ended Friday down -0.6% at 1.3200 having briefly hit 1.3364 high. UsdJpy was up 1.2% at 116.33.
Todays Key Issues:
Are due at 9:30 GMT; GB November Producer Price Index Input expected -0.1% unchanged (MoM) and 1.7% vs 3.8% (YoY), PPI output 0.2% vs -0.2% (MoM) and 1.9% vs 1.7% (YoY), GB October Trade Balance expected ¬£-6.6B vs ¬£-6.56B. CAD October new Housing Price Index due at 13:30 GMT is expected 0.5% unchanged. CAD 3Q Labor Productivity due at 13:30 GMT is expected 0.4% vs -0.4%. US October Wholesale inventories due at 15:00 GMT is expected 0.3% to 0.8% vs 0.9%. JPY Japan November Domestic Corporate Goods Price Index due at 23:50 GMT is expected -0.1% vs -0.3% (MoM) and 2.7% vs 2.8% (YoY).
The Risk Today:
The USD staged a dramatic comeback on Friday. With momentum conditions in a bearish mode, the risk is for further intraday weakness in EurUsd towards support at 1.3085 as 1.3130 pivot support could be broken very soon. On the upside, resistance is holding 1.3370. It might be too early to suggest the trend has reversed, but a break above 1.3370 is now required to confirm a return of the bull trend, and the end of the lately developed bearish threat. UsdChf gains have now exposed resistance at 1.2120 following the recent sharp recovery off 1.1880 (Dec. low). The 1.2120 resistance needs to hold to prevent a strong near term recovery in the USD. GbpUsd weakness has exposed the 1.9435 support (38.2% retracement of the 1.8835-1.9849 rise). The outlook remains bullish overall, but a break below the 1.9435 support would expose 1.9340 (50% retracement level. 1.9730 resistance). UsdJpy has cleared some important resistance levels, the most recent being 116.60. While the very short-term conditions might be overbought for the USD, Friday's recovery does suggest that further gains are likely in the days ahead. The next resistance is the 117.40 trendline. Support is holding 114.90, Friday‚Äôs low.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.3480 K ||1.9900 S ||119.90 T ||1.2346 K |
|1.3400 P ||1.9850 P ||118.60 S ||1.2120 S |
|1.3370 S ||1.9730 M ||117.40 T ||1.2060 M |
|1.3201 ||1.9545 ||116.60 ||1.2043 |
|1.3130 P ||1.9550 S ||114.90 M ||1.1920 P |
|1.3085 S ||1.9435 K ||114.00 S ||1.1880 T |
|1.2941 M ||1.9340 S ||113.45 T ||1.1760 S |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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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
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15:00 US- final University of Michigan
17:00 US- early Closes
Mon 25 Dec
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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
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