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Monday February 26, 2007 - 11:53:54 GMT
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ACM - www.ac-markets.com
Euro-zone interest rates to rise in March...
By Jean-Claude Braha - ACM Senior Trader
News and Events:
The Dollar weakened against the Euro and the Yen on Friday, with German economic data boosting the case for higher European Interest rates and investors cutting bets on further weakness in the Japanese currency. The German Ifo business sentiment survey for February showed a larger decline than expected but didn't change the outlook for Euro-zone interest rates to rise in March. The Headline index fell to 107.0 from 107.9. The decline was broadly based by industry and it might suggest that retailers are now starting to fell a negative effect from this year's VAT's hike. But analysts noted that the index remains above its November level, and also higher than its long-run average. While analysts had expected a fall in the current conditions index from its current high, largely due to the VAT hike, the fall in expectations after to consecutive increases was more disappointing.
Despite Friday's gains in the Yen, last week the Japanese currency dropped about 1.73% against the Dollar. Also the Yen dropped against the Euro 1.63% last week, the strongest EurJpy advance since September 2005. The Yen has been under broad pressure for weeks as investors renewed Carry-trades in which they borrow the Yen at low interest rates and then sell it to buy higher-yielding currencies. However, expectations the Bank of Japan will raise rates again this year slowed investors of selling Yen too aggressively. The EurJpy rose to a record high of 159.65 but struggled to break through resistance and ended last week at 159.46. Last week, the Yen fell against the Euro after Bank of Japan Governor Toshihiko Fukui repeated that raising interest rates further would be a slow process and the timing of the next rate hike is completely open. Some technical analysts expect the EurJpy to push toward 160 level in coming weeks.
The high-yielding Australian dollar was up 2.04% against the Yen at 95.89 last week.
Elsewhere, EurGbp was down -0.43% at 0.6709 after the Bank of England policy-maker expressed concern about inflationary pressure; renewing talks of a near-term interest rate hike. GbpUsd went Friday up 0.69% at 1.9634. Canadian Dollar jumped to a two-month high against the Us on Friday, UsdCad 1.1598 -0.2%, getting support from higher oil prices.
Today's Key Issues:
CAD 13:00 GMT: 4Q International Travel Account expected CAD -1.9B vs -1.89B
CAD 13:30 GMT: December average weekly earnings expected 0.5% vs 0.4%
US 14:40 GMT: Federal Reserve's Bies speaks in New York
Euro 16:00 GMT: European Central Bank's Quaden presents annual report in Antwerp
UK 17:30 GMT: Bank of England's Blanchflower speaks in UK
NZD 0:00 GMT: NBNZ January Business Confidence previously -7.7
The Risk Today:
EurUsd maintains a bullish tone, holding above 1.3095 support and 1.3074 former resistance. On the upside, a break of 1.3176 (61.8% retracement of the 1.3268 to 1.2865 decline) would open the way to 1.3250 (76.4% retracement of the 1.3368 to 1.2865 decline), ahead of 1.3290 early January high. Sentiment remains positive above 1.3074; failure to maintain this level would unlock 1.2990 (61.8% retracement of the 1.2865 to 1.3191 advance).
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 rebound from 118.99 to 121.64 didn't hold. From 121.60 strong resistance, further downside would show 120 and 119.90 levels. But it would need a clear break of 119.71 to offset the upward trend in the near term.
UsdChf is still under pressure following the break below 1.2411 (23.6% retracement of 1.1879 to 1.2575 advance) and targeting 1.2310 (38.2% retracement of the 1.1879 to 1.2575 advance). Looking from there a possible downside to 1.2276 and then 1.2146 (61.8% retracement). But as long as 1.2310 remains intact, we might look for a recovery to 1.2438 en route to 1.2477 resistance (61.8% retracement of the 1.2575 to 1.2312 decline).
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 ||122.05 M ||1.2575 S |
|1.3176 S ||1.9650 M ||121.60 S ||1.2477 S |
|1.3175 ||1.9640 ||120.85 ||1.2310 |
|1.3074 S ||1.9482 K ||119.90 K ||1.2276 S |
|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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