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Wednesday January 10, 2007 - 09:30:52 GMT
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ACM - www.ac-markets.com
Dollar rallies against Yen as BoJ rate hike seems discounted by dealers.
By Jean-Claude Braha - ACM Senior Trader
Yesterdays News and Events:
The Dollar rallied near two month-highs against the Yen on Tuesday amid investors‚Äô expectations that a possible rate hike by the Bank of Japan will fail to boost demand for the Japanese currency. Japanese investors, returning to the market from a public holiday on Monday, initiated a fresh wave of selling on the perception that even the anticipate rate hike from the BoJ next week will not counter the carry trade (selling low yielding currency against a higher yielder as Euro). The Yen was the worst performer of the day, falling against all major currencies; UsdJpy was up 0.5% at 119.30 its largest advance over a month. Meanwhile, EurJpy was up 0.16% at 155.02 and GbpJpy up 0.43% at 231.32. The BoJ begins a two-day meeting on January 17th to discuss monetary policy and may raise rates to 0.5% from 0.25%. Elsewhere, a sharp fall in crude oil futures helped the Dollar port gains against the Euro and CHF. Analysts said the drop in oil would probably help shrink the US trade deficit and boost consumer spending. EurUsd was down -0.32% at 1.2996 expending decline with lowering expectations for a rate cut from the Federal Reserve in the first half of the year. GbpUsd was nearly unchanged -0.06% at 1.9389 after a rally at 1.9456 high on speculation that British interest rates may rise further at Bank of England next policy meeting.
Todays Key Issues:
Are due at 9:30 GMT; GB November Visible Trade Balance is expected -¬£6.48B vs -¬£6.33B and GB Non-EU25 -¬£3.9B vs -¬£3.95B. US November Trade Balance due at 13:30 GMT is expected -$59.5B vs -$58.9B. CAD Are due at 13:30 GMT; November New Housing Price Index previously 0.2% and November International merchandise Trade expected CAD 4.2B vs 3.8B. US November Wholesale Inventories due at 15:00 GMT is expected 0.4% vs 0.8%.
The Risk Today:
EurUsd outlook remains bearish following the overnight break to fresh lows. With momentum conditions continuing to provide a bearish backdrop as well, further downside is anticipated and we see potential for a decline towards the 1.2900 (50% retracement of the 1.2483-1.3368 rally). A break above yesterday's high of 1.3050 is required to stop the current slide. UsdChf had tested the 61.8% retracement of the 1.2771 to 1.1879 decline at 1.2430. The outlook remains constructive with 1.2540 target. GbpUsd; as long as 1.9530 resistance holds (61.8% retracement of the 1.9750 to 1.9260 decline) it will favor the downside for a move through 1.9260 and toward 1.9180. UsdJpy, looking at the recent pullback from 119.90 to 117.44; it is attempting to re-establish its underlying bull trend. The focus is on the 119.65 trend high with key resistance at 119.90. Only a break of 118 would undermine the bull trend.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.3400 T ||1.9850 P ||120.00 P ||1.2540 S |
|1.3130 P ||1.9530 S ||119.90 T ||1.2440 S |
|1.3050 S ||1.9435 M ||119.65 S ||1.2430 K |
|1.2995 ||1.9405 ||119.25 ||1.2405 |
|1.2980 K ||1.9260 M ||118.30 S ||1.2270 S |
|1.2940 S ||1.9180 M ||117.44 S ||1.2240 S |
|1.2900 T ||1.8840 S ||115.80 S ||1.2030 T |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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