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Friday January 12, 2007 - 10:02:40 GMT
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ACM - www.ac-markets.com
Bank of England unexpectedly increases rates to 5.25%.
By Jean-Claude Braha - ACM Senior Trader
Yesterdays News and Events:
GbpUsd rose 0.63% to 1.9443 after the Bank of England surprised markets with an increase in UK rates to 5.25%. GbpUsd made 1.9537 intraday high. EurGbp dropped sharply after announcement -0.94% to 0.6632. The Euro dived to its lowest since late November against the Dollar after the European Central Bank suggested it may not raise rates again next month as some had anticipated. The markets interpreted ECB President Mr. Trichet‚Äôs remarks as offering no clear signal that rates would raise next month and perhaps not in March. Mr. Trichet said after the ECB left rates at 3.5% that policy remained accommodative but the bank would not use ‚Äústrong vigilance‚ÄĚ in setting monetary policy. EurUsd was down -0.35% to 1.2893 after pointing an intraday high 1.3016. EurJpy posted some gains to 155.16 +0.33% but down from the session high 156.35. Meanwhile, the UsdJpy also rallied reaching its highest level in over a year, above 120 psychological level, +0.81% at 120.34. Investors doubt that a rate raise next week from the Bank of Japan will boost the Yen, given that it will still be the lowest yielding currency within the Group of Seven, and could not be the start for a large unwinding in the carry trades.
Todays Key Issues:
Euro November OECD Leading Indicator is due at 11:00 GMT, previously 109.4. Are due at 13:30 GTM; US December Import Price Index expected 0.6% vs 0.2% (MoM), US December Advance Retail Sales expected 0.7% vs 1% (MoM) and Retail Sales Less Auto expected 0.6% vs 1.1% (MoM). US November ¬£Business Inventories due at 15:00 GMT is expected 0.4% unchanged. US December monthly Budget Statement due at 19:00 GTM is expected $20B vs $11B.
The Risk Today:
EurUsd outlook remains bearish with further Euro weakness to test supports between 1.2925 and 1.2900 (50% retracement of the 1.2483-1.3368 rally). Further downside focuses at 61.8% retracement of the 1.2483-1.3368 climb lies at 1.2820. Strength above Tuesday's high of 1.3050 would halt the current slide. UsdChf has cleared the 61.8% retracement of the 1.2771 to 1.1879 decline at 1.2430. The outlook remains constructive with target on 1.2540. Initial support lies at 1.2400. GbpUsd's yesterday rebound rise through 1.9456 former initial resistance and is exposing next resistances 1.9530 to 1.9570 (61.8% retracement of the 1.9755 to 1.9260 decline). A break of this area would expose 1.9755 (Jan high). Initial support is now at the former 1.9456, but only a break of Thursday's 1.9315 low would reinstate a short-term bearish theme. UsdJpy has resumed the bull trend, clearing 119.90 (Oct high) and 120 psychological level. This exposes the 121.40 high from December 2005. Key support is at 117.98.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.3400 T ||1.9850 P ||122.15 S ||1.2770 T |
|1.3130 P ||1.9755 S ||121.40 T ||1.2585 M |
|1.3050 S ||1.9530 M ||120.37 M ||1.2540 S |
|1.2900 ||1.9465 ||120.36 ||1.2500 |
|1.2980 K ||1.9456 M ||119.90 T ||1.2430 K |
|1.2900 T ||1.9315 S ||118.00 P ||1.2400 M |
|1.2820 S ||1.9180 M ||117.44 S ||1.2220 S |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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