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Wednesday December 13, 2006 - 08:56:54 GMT
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ACM - www.ac-markets.com
Dollar fell after Fed kept rates unchanged and said inflation is likely to moderate.
By Jean-Claude Braha - ACM Senior Trader
Yesterdays News and Events:
The Dollar declined on Tuesday, after the Federal Reserve kept interest rates steady, as expected, but gave a softer tone in its statement by noting the risks from a cooling housing market. The Central bank kept the federal funds rate steady at 5.25% for a fourth straight meeting but it warned about inflation in its statement. Analysts said the selling of the dollar was pushed by market participants who had bought Dollars going into the Fed decision in anticipation of comments that would focus more on inflation risks. Market strongly favors the Fedâ€™s rate pause to continue for the next few meetings. There is very low chance that the Fed will cut rates in January, but this is more likely to happen in March. Earlier in the day, the Dollar has been boosted after data showing the US Trade deficit in October fell to its narrowest level since August 2005.EurUsd rose to 1.3292 high after the Fed statement before trading back down to 1.3282, still up 0.3%. EurJpy hit a record high at 155.27 and last traded at 155.03 up 0.3%. GbpUsd rose 0.6% to 1.9711 near intraday high 1.9716. The effect of FOMC statement is expected to carry through Europeâ€™s session where dealers will work this newly negative tone.
Todays Key Issues:
Euro, German November CPI due at 07:00 GMT is expected -0.1% unchanged (MoM) and 1.5% unchanged (YoY). French November CPI due at 07:45 GMT expected 0% vs -0.2% (MoM) and 1.3% vs 1.1% (YoY). Are due at 9:30 GMT; UK October Unemployment Rate (3months) expected 5.6% unchanged, UK November Jobless Claims Change expected 4k vs 1.2k. Are due at 13:30 GMT; US November Advance Retail Sales expected 0.2% vs -0.2% and US November Retail Sales Less Auto 0.3% vs -0.4%. NZD October Retail Sales due at 21:45 GMT is expected 0.1% vs 1.2%.
The Risk Today:
EurUsd has rebound from support at 1.3130 hilted on Monday. 1.3370 is still the next resistance. These two levels are now seen as the key directional triggers. Momentum conditions remain a concern and any further weakness would expose 1.3085. Helped by recent advance, a break above 1.3370 is now required to confirm a resumption of the bull trend, and cancel the early December developing bearish threat. UsdChf lost part of its advance from 1.1880 last week low, which was exposing resistance at 1.2120. Still the 1.2120 resistance needs to hold to prevent a strong near term recovery in the USD. For now, the underlying trend remains bearish; a break below 1.1880 would confirm a resumption of this trend. GbpUsd recovered most of its recent weakness and did not expose 1.9435 support (38.2% retracement of the 1.8835-1.9849 rise). A break of this support would damage the lately bull trend. The outlook remains bullish overall and 1.9730 marks the initial resistance. UsdJpy remains firmer after having cleared some important resistance levels, the most recent being 116.60 early this week. The next key resistance is the 117.40 trendline.
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 |
|1.3285 ||1.9714 ||116.90 ||1.1991 |
|1.3130 P ||1.9550 S ||116.60 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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