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Friday March 2, 2007 - 10:28:00 GMT
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ACM - www.ac-markets.com
The US ISM Manufacturing Index rebounded to 52.3
By Jean-Claude Braha - ACM Senior Trader
News and Events:
The Dollar rose against the Euro for a second day on Thursday, buoyed by a strong February reading on US manufacturing, while a global sell-off in stock markets helped drive the Yen sharply higher. The US ISM manufacturing index rebounded to 52.3 in February, from 49.3, leaving it at a level consistent with growth of roughly 2.5% in the wider economy. Consensus was 50.0. The data helped slightly to cool Forex market worries that the Federal Reserve may cut interest rates in the coming months, although futures markets showed dealers were still expecting the US Central Bank to lower rates from 5.25% by August. The Yen jumped higher yesterday as a sharp fall in US stocks led some investors to continue buying back the Japanese currency, which they had borrowed to finance bets on risky assets. The Yen rally started Tuesday when China's benchmark stock index posted its biggest daily fall in a decade. Markets have been driven by worries about rising defaults among high-risk borrowers in US sub-prime mortgages, tensions over Iran's nuclear program and few weaker-than-expected US data. In addition, Japan's top financial diplomat said Thursday that investors should recognize the two-way risk in highly leveraged carry-trades financed by borrowing in Yen.
EurUsd was down -0.45% to 1.3169 and EurJpy fell about -1.29% at 155.06. In strong â€śBuying Yenâ€ť attitude, UsdJpy fell -0.85% to 117.75 after deep low 116.97 intraday. The Dollar dived almost 3% against the Yen this week, its worst weekly performance in the last 12 months.
Today's Key Issues:
UK 9:30 GMT: February Purchasing Managers' Index Construction previously 57.90
Euro 10:00 GMT: January Euro-zone Producer Price Index expected 0.1% to 0.3% vs 0% (MoM) and 3% to 3.1% vs 4.1% (YoY)
CAD 13:30 GMT: December Gross Domestic Product expected 0.3% to 0.5% vs 0.2% (MoM) and 4Q GDP annualized 1% to 1.3% vs 1.7%. 4Q Consumption Spending expected 3.2% vs 4.2%.
US 15:00 GMT: February final University of Michigan Confidence expected 93.5 to 93.8 vs 93.3
The Risk Today:
EurUsd has defined resistance at 1.3260 late Feb high. The pair has support at the 1.3150 low from Monday; only a break here would put the bull trend on hold, and a break of last Thursday's 1.3079 would confirm the short term downtrend. There market would target 1.2990 (61.8% retracement of the 1.2865 to 1.3191 advance). Until then market looks at 1.3250 (76.4% retracement of the 1.3368-1.2865 decline) and 1.3290 trendline resistance.
GbpUsd Only a breakout from 1.9403 â€“ 1.9750 trading 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. For now, it's playing with minor resistance 1.9650 and 1.9518 minor support.
UsdJpy continued its sharp decline started Tuesday and hit low and major trendline support at 116.96. However, rebound from there needs to move above initial resistance in the 118 low to offset downward momentum for now. Further weakness under 118 pivot point support would drive lower toward 117.26 and 116.65.
UsdChf recent slide has found support around 1.2144 (61.8% retracement of the 1.1879-1.2575 big rally). But it will take a move above 1.2256 (38.2% retracement of the 1.2438-1.2143) to offset downward momentum for now. Initial resistance is at the 1.2310 breakout low. Deeper fall towards 1.2110 early January low and expose 1.1980 December low.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.3364 T ||1.9850 P ||121.60 S ||1.2575 S |
|1.3290 T ||1.9750 S ||119.90 K ||1.2477 S |
|1.3260 S ||1.9650 M ||118.00 P ||1.2310 M |
|1.3175 ||1.9550 ||117.75 ||1.2240 |
|1.3150 S ||1.9482 K ||117.44 S ||1.2144 S |
|1.3074 S ||1.9403 S ||117.26 M ||1.2030 T |
|1.2900 T ||1.9315 S ||116.65 M ||1.1980 S |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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