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Monday February 5, 2007 - 09:38:42 GMT
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ACM - www.ac-markets.com
Dollar rose after moderate growth in US payrolls.
By Jean-Claude Braha - ACM Senior Trader
News and Events:
The Dollar rose on Friday after US Payrolls data showed moderately healthy job growth, but did not gave clues about near term change in US interest rates. US Non-farm Payrolls increase by a slightly disappointing 111,000 in January. Consensus was 150,000. Disappointment came also from revisions in November and December numbers with a total of 81â€™000 up. This latest data didnâ€™t show any sign That the Federal Reserve may neither cut nor raise interest rates very soon. The Dollar also added strength after rumors in the market saying the European Central Bank may raise rates just one more time. Investors are still having lost of uncertainty about where the ECB may take interest rates this year. This sentiment has been weighting on the Euro recently, as analysts were expecting the ECB to take rates to 4% before pausing, and now it looks like they will only rise to 3.75%. The ECB has delivered six quarter percentage point hikes since late 2005, pushing its refinancing rate to 3.5%. Benchmark US and UK interest rates stand at 5.25%. Japanese Interest Rates still at 0.25% have given investors more room to borrow Yen for funds to buy higher-yielding currencies. European officials seem more concern about the Yen â€śtroubleâ€ť looking at the 16% fall in the past three years to a record low against the Euro. In Europe, German retail sales rose sharply in December, data for Q4 as a whole show that sales fell by 0.2%. So the timing effects of this yearâ€™s VAT hike look likely to have been far more muted than those in the past, suggesting that sales will not fall as sharply as we had feared at the start of this year. EurUsd returns under the psychologically important 1.3000 level at 1.2962 -0.41%. UsdJpy was up 0.24% at 121.12 shifting away for the four-year highs of 122.20. EurJpy was down -0.2% to 157 and GbpJpy up 0.2% to 238.15. EurGbp dropped -0.38% to 0.6593. UsdCad was up 0.42% at 1.1843.
Today's Key Issues:
With a fairly light data calendar this week, the market is likely to focus on the 9-10 February Group of Seven meeting.
Euro 9:00 GMT: January Purchasing Managerâ€™s Index Services expected 56 to 57.9 vs 57.2.
GB 9:30 GMT: January Purchasing Managerâ€™s Index Services expected 59.8 to 61 vs 60.6.
US 15.00 GMT: January ISM Non-Manufacturing expected 55 to 57 vs 56.7.
CAD 15:00 GMT: January Ivey Purchasing managers Index expected 49 to 53 vs 49.4.
The Risk Today:
EurUsd briefly violated 1.3050 resistance at 1.3057 (38.2% retracement of the 1.3368-1.2865 decline). The abrupt reversal afterwards has exposed support at 1.2925 last week low and minor support. A break of 1.2900 trend support would signal a resumption of the bear trend and open 1.2866 and 1.2820 strong support. On the upside, a break of Friday's high at 1.3065 is required to reinstate a bullish theme.
GbpUsd recovered from last week 1.9482 lows, but it stalled right in front of 1.9750 resistance (61.8% retracement of the 1.9917-1.9482 decline). Only a move above there would reasonably confirm a return of the underlying bull trend, opening the door for a run above the 1.9917 trend high. Minor support is around 1.9590 but only a break of 1.9482 would damage the growing bull trend.
UsdJpyâ€™s notable setback from the 122.20 trend high stabilized after pushing to 120.11 low last Thursday. Only a break of the 120 former psychological level as well as the former 119.90 breakout point would reasonably confirm a shift away from the bull channel that has carried this pair higher since the early-December 114.43 low. A move above 121.40 (61.8% retracement of the 122.20-120.10 decline) would re-establish the bull trend for a run toward 122.20.
UsdChf trend remains up while 1.2376 support holds with the next key bull trigger at 1.2575. Penetration of the 1.2376 support would clearly end the bull channel from early-December 1.1881 low and expose 1.2309 (38.2% retracement of the rally from 1.1881 to 1.2573). For now key support stands at 1.2430 followed by minor 1.2400.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.3290 T ||1.9917 T ||123.25 K ||1.2770 T |
|1.3130 P ||1.9850 P ||122.40 S ||1.2585 M |
|1.3050 S ||1.9736 M ||121.40 T ||1.2550 S |
|1.2945 ||1.9640 ||120.85 ||1.2490 |
|1.2900 T ||1.9590 M ||120.65 M ||1.2430 K |
|1.2866 M ||1.9512 S ||120.20 S ||1.2376 S |
|1.2820 S ||1.9315 S ||119.90 S ||1.2260 S |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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