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Monday March 12, 2007 - 10:35:03 GMT
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ACM - www.ac-markets.com
Dollar advanced on healthier US employment and US Trade data
By Jean-Claude Braha - ACM Senior Trader
News and Events:
The Dollar rose sharply since Friday as data showed the US employment picture was healthier than many investors had feared, easing concerns of a possible interest rate cut. February's US employment report was mixed; on the downside, non-farm payrolls increased by only 97'000, in line with market expectations, and average hours worked slipped to 33.7, from 33.8. In addition, payroll gains for December and January were revised up by a total of 55,000. There was also a reported decline in the unemployment rate to 4.4%, from 4.5%, although the drop was principally due to a rather suspicious looking 190,000 decrease in the labor force rather than a jump in the household measure of employment. Another Government report helped the Dollar; it showed the US International Trade gap narrowed more sharply than expected to $59.1B in January, following a record trade deficit in 2006. Friday's jobs report eased some of the concerns, with traders paring bets on a possible rate cut by mid-year. US short-term interest rates futures fell after the labor data, showing chances for a rate cut by May at just 4% against 22% last Thursday.
Market talks that "carry-trades" are back is on every dealers and traders mind and the powerful rebound of Yen crosses leaves the impression that last week's rise of Capital Market volatility was just a transition act and not the start of a new trend. UsdJpy rose 1% to 118.38, erasing more than half of the losses incurred because of the shakeout last week. EurJpy rose 0.8% to 155.17. Analysts cautioned that last week's sudden jump in volatility, which pushed the Yen to a three-month high against the Dollar and pushed down Global Stock markets, may return.
High-yielding currencies, such as New Zealand and Australian Dollars, got a boost after payrolls report. NzdUsd rose 0.41% to 0.6916 after having hit 0.6917 intraday high. NzdJpy advanced by 1.6% to 81.69 on Friday, adding a total 1.87% rise last week against previous week loss of -6.26%.
Today's Key Issues:
GB 9:30 GMT: January Producer Price Index not seasonally adjusted 0.2% vs 0.3% (MoM) and 2.1% unchanged (YoY). PPI Core seasonally adjusted 0.2% unchanged (MoM) and 2.3% vs 2.2% (YoY).
CAD 12:30 GMT: 4Q Labor productivity -0.4% vs -0.1% (QoQ)
US 16:20 GMT: Fed's Kroszner speaks at Washington Economics Conference
US 18:00 GMT: February Monthly Budget Statement $-116.5B vs $38.2B
NZD 21:45 GMT: January Retail Sales 0.2% vs 0.7% (MoM)
The Risk Today:
EurUsd continues to hold above support at 1.3074, keeping the bullish tone from the 1.2865 mid-January alive. A break above the 1.3189 resistance (61.8% of 1.3261-1.3072) would confirm a return of the underlying bull trend and open the door toward the 1.3260 late February trend high. On the downside, a break of 1.3074 would expose further downside toward 1.3024. There market would target 1.2990 (61.8% retracement of the 1.2865 to 1.3191 advance).
GbpUsd remains heavy after the recent break of the bottom of the large trading range at the 1.9402 Mid-February low. Focus remains on the 1.9146 Pivot support from last November. Initial resistances 1.9360 has been cleared, therefore 1.9403 resistance should cap the upside for the near term.
UsdJpy rebound from 115.15 has put the bear on hold in the short term but maintains a corrective appearance. Expect further gains towards next resistance at 118.88. Downside risk may be renewed under 117.44 former resistance and 115.15 early March low, they would be the clear signs of the underlying bear trend. Note there is little support below 115.15 until the 114.44 support.
UsdChf pushed through the 1.2263 early March high and 1.2296 minor resistance; offsetting broader downward pressure from the 1.2575 late January high. Focus is now on sustained break of 1.2342 (50% retracement of the 1.2575-1.2108 decline) for 1.2438, Feb 22 high. Initial support is at 1.2257 Friday low ahead of last Thursday's 1.2159 low.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.3290 T ||1.9850 P ||120.00 T ||1.2575 S |
|1.3250 S ||1.9750 S ||119.90 K ||1.2438 M |
|1.3189 M ||1.9403 S ||118.88 M ||1.2342 S |
|1.3125 ||1.9385 ||118.40 ||1.2330 |
|1.3074 S ||1.9220 M ||117.44 S ||1.2258 M |
|1.2990 S ||1.9188 S ||115.15 M ||1.2109 S |
|1.2900 T ||1.9146 P ||114.44 S ||1.2030 T |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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