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Wednesday February 21, 2007 - 09:46:53 GMT
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ACM - www.ac-markets.com
Yen still under pressure ahead of BoJ rate decision.
By Jean-Claude Braha - ACM Senior Trader
News and Events:
The Yen fell for a third straight session on Tuesday as investors are worried that an interest rate hike by the Bank of Japan would certainly not slow the selling of the Japanese currency. Investors are split on whether the BoJ will raise Japanese borrowing costs by 0.25% to 0.50% at the end of a two-day policy meeting. But many said that even if the central bank were to raise rate, it would have little effects on carry-trades; in which investors have been dumping the Yen in favor of higher yielding currencies. The Dollar fell as low as 118.99 last week, its weakest in more than a month against the Japanese currency, and was trading intraday at 120.02 up 0.26%. Since the BoJ opened its policy of holding rates at virtually zero last July, the Central Bank has held them steady as the economy was expected to come out of deflation.
The low yielding currencies such as CHF and Yen have been speculator's favorite choice to finance carry trades. UsdChf rose 0.22% to 1.2359.
With US markets returning from a three-day weekend and no major news to provide direction, the Dollar was little change against most major currencies. It quickly slipped to a six-week low against the Euro after BBC News reported that Washington had contingency plans for air strikes on Iran. In addition to the BoJ decision, investors are also looking ahead on Wednesday to US consumer Price data, as well as Minutes from the Federal Reserve's January policy meeting, where the Central Bank held rates at 5.52% for a fifth straight meeting on January 30-31st. EurUsd was down -0.05% at 1.3146. Gold dropped from 673.50 Monday high to 658.30, down 1.83% for the day, as funds liquidated positions reflecting falls in energy prices and a firmer Dollar against the Yen. Gold may be again under pressure and analysts are watching whether it can hold above $655 in the near term. Technical trend for Gold deteriorated after it dipped below key near-term moving average line. It is below the seven-day moving average of $665 and the 14-dayaverage of $ 660.
Today's Key Issues:
JPN 5:00 GMT: Bank of Japan rate decision
EURO 7:45 GMT: January French Consumer Price Index expected -0.3% vs 0.2% (MoM) and 1.4% vs 1.5% (YoY)
GB 9:30 GMT: Bank of England Minutes
CAD 13:30 GMT: December Retail Sales expected 1% vs 0.2% and 0.6% vs 0.1% less auto
US 13:30 GMT: January Consumer Price Index expected 0.1% vs 0.5% (MoM) and 0.2% unchanged Ex-food & energy
US 19:00 GMT: FOMC Minutes of January 30-31st meeting
The Risk Today:
EurUsd tested again resistance at 1.3176 (61.8% retracement of the 1.3268 to 1.2865 decline) which could open the way towards 1.3290. Initial support lies at 1.3095 last Friday low, but only a break of the 1.2900 would jeopardize the potential for a move above 1.3176 and toward the 1.3298 early January high.
GbpUsd remains in 1.9403 â€“ 1.9750 trading for the past couple of weeks. Only a breakout from this range would mark the next key directional trend. A break of 1.9750 resistance (61.8% retracement of the 1.9917-1.9482 decline) is required to confirm the return of the bull trend.
UsdJpy recovered from recent 118.99 low. Further advance would open the door to 121 and even higher to 122.20. But unsuccessful break of 119.90 would keep the Yen under pressure and may expose 119.23 (38.2% retracement of the 114.43-122.20 rally). Next support is 118 pivot point. Waiting for direction; 119.90 is key level.
UsdChf rebound on yesterday 1.2312 low but remains under pressure below 1.2376 former support. Further weakness may break 1.2309 (38.2% retracement of 1.1881-1.2574 advance). The next important support is the 1.2260. Initial resistance is at 1.2412.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.3364 T ||1.9850 P ||122.20 S ||1.2770 T |
|1.3290 T ||1.9750 S ||121.00 M ||1.2575 S |
|1.3176 S ||1.9604 M ||119.90 K ||1.2376 S |
|1.3145 ||1.9560 ||120.35 ||1.2360 |
|1.3050 M ||1.9482 K ||119.23 S ||1.2309 M |
|1.2900 T ||1.9403 S ||118.00 P ||1.2260 S |
|1.2866 K ||1.9315 S ||117.44 S ||1.2030 T |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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