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Wednesday March 7, 2007 - 10:45:03 GMT
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ACM - www.ac-markets.com
Yen dropped after a rebound in Global equity...
By Jean-Claude Braha - ACM Senior Trader
News and Events:
The Yen dropped against the Dollar on Tuesday after a rebound in global stocks suggested investors were for now safe borrowing the Japanese currency to fund bets on riskier assets. Over the last week, a sudden pullback from riskier investments started a sharp decline in stock prices around the world and large liquidations in carry-trades positions funded with low-yielding currencies as Yen and Swiss Francs. The Yen posted its biggest weekly percentage gain against the Euro since August 2003 and against the Dollar since December 2005. This week of carry-trade unwinding took the EurJpy down to a 3-month low of 150.74 -4.24%, far away from its record high near 160 from late February. Some strategists believe Yen had run its course for now and may consolidate. Currency dealers are now are not expecting more sell-off against the UsdJpy as they see more evidence that last week's decline is over.
Meanwhile, US economic data has not been a focus, but investors await Friday's US employment report which could be the key event for the Dollar. The Dollar showed little reaction to news that productivity growth increased less than economists had expected in the fourth quarter. But the jump in unit labor cost by 6.6%, up from the previous 1.7%, may force Market participants to reconsider the possibility of a Fed rate cut in the second quarter, which has largely been expected.
Bank of Canada left its overnight interest rate at 4.25%. UsdCad was down -0.4% at 1.1758. As well, Reserve Bank of Australia left interest rate at 6.25%. Reserve Bank of New Zealand, Bank of England and European Central Bank will hold policy meeting this Wednesday.
Today's Key Issues:
CHF 06:45 GMT: February Unemployment Rate 3.2% vs 3.3% and seasonally adjusted 3% unchanged
Euro 11:00 GMT: January German Factory Orders seasonally adjusted 0.4% vs -0.2% (MoM) and 6.7% vs 1.7% not adjusted (YoY)
GB 11:00 GMT: February BRC Retail Sales Monitor 2.3% vs 3.1% (YoY)
US 13:15 GMT: February ADP Employment change 100k vs 126k
USD 18:00 GMT: Fed's Moskow speaks on Economic Outlook
NZD 20:00 GTM: Reserve Bank of New Zealand Rate Decision 7.5% vs 7.25%
The Risk Today:
EurUsd made a little recovery from recent low 1.3073. On the downside, a break of 1.3074 would confirm the short term negative trend and expose further downside toward 1.3024. There market would target 1.2990 (61.8% retracement of the 1.2865 to 1.3191 advance). On the Upside, market looks at 1.3250 (76.4% retracement of the 1.3368-1.2865 decline) and 1.3290 trendline resistance. Initial resistance is located at 1.3212 followed by 1.3260 late Feb high.
GbpUsd is likely to remain under pressure having cleared the base of 1.9402 â€“ 1.9750 trading range. Sterling made a rebound on 1.9197 initial support. But a break lower may target 1.9146, late November low. On the upside, initial resistances are 1.9360.
UsdJpy is still under pressure following the sharp losses over the past few days. It has found support at 115.60. A break there would open the door down to 114.38, early December low. Initial resistance is expected at 117.44. But there, only a rebound above 118 pivot point would end the downtrend.
UsdChf is consolidating over recent support 1.2110. Trading range is set between 1.2120 and 1.2263; where a break up would offset the downward pressure. On the downside, there is little support below the current 1.2110 low until 1.2043 (76.4% retracement of the 1.1879-1.2575 rise). This would expose 1.1980 December low.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.3364 T ||1.9750 S ||119.90 K ||1.2575 S |
|1.3290 T ||1.9403 S ||118.00 P ||1.2477 S |
|1.3250 S ||1.9360 M ||117.44 S ||1.2363 M |
|1.3120 ||1.9270 ||116.30 ||1.2240 |
|1.3074 S ||1.9220 M ||114.38 S ||1.2110 S |
|1.2990 S ||1.9188 S ||114.07 M ||1.2030 T |
|1.2900 T ||1.9146 P ||111.96 S ||1.1980 S |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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