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Wednesday March 21, 2007 - 09:06:08 GMT
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ACM - www.ac-markets.com
Dollar fell as Chinese reserve comments boosted Yen
By Jean-Claude Braha - ACM Senior Trader
News and Events:
The Dollar fell against the Yen on Tuesday after a magazine reported that China would stop stockpiling Foreign Exchange reserves and slipped against other major currencies as investors remained wary of risky trades. But analysts said People's Bank of China Governor Zhou Xiaochuan might have been misquoted, since China $1 trillion reserves will keep growing as long as Central Bank buys Dollars to prevent the Yuan from strengthening. This practice will likely not be abandon very time soon. Zhou was quote by the Emerging Markets magazine as saying â€śmany people say that foreign exchange reserves in China are (already) large enough. We do not intend to go further and accumulate reservesâ€ť. UsdJpy dipped to 116.93 low and ended traded at 117.26 -0.31%. EurJpy was down -0.29% to 156.13 after hitting 156.96 high. On the contrary, GbpJpy was up 1.41% to 228.91.
The Dollar was also hurt Tuesday by US housing market which was seen as slightly Dollar negative. Tough February Housing Starts rose 1525K in February, from 1399k. But it is hard to conclude that the market is stabilizing, because building permits were less volatile at 1121k vs 1220. Analysts said the housing starts increase may have distorted by weather issue.
The housing data came out as the Federal Open Market Committee began its two-day meeting that concludes Wednesday. Dealers are expecting the FOMC to announce after the meeting that it's keeping rates unchanged at 5.25%. Most awaited, the post-meeting statement would help traders believe it may include wording about housing market woes, which could push the Dollar down against the all majors. This would be a reversal from the FOMC's last statement when it noted prematurely â€śsigns of stabilizationâ€ť in the housing sector.
BoJ' expected rate decision with lighter equity market had encouraged investors to jump back into carry trades positions, helping to boost the Dollar and the Euro against the Japanese currency. Meanwhile, Sterling and Canadian Dollar rallied Tuesday following stronger-than-expected inflation report. GbpUsd went to an intraday high 1.9625, its highest level from early March. UsdCad end sharply lower, ending -1.37% at 1.1602, after an unexpectedly strong Canadian CPI at 0.7% monthly and 2% yearly.
Today's Key Issues:
JPN: Japan Markets closed for Spring Equinox
CHF 07:15 GMT: February Trade Balance previously 1.29B
EUR 08:00 GMT: ECB's Trichet speaks to European Parliament in Brussels
GBP 09:30 GMT: Bank of England Minutes for March 7-8 meeting
CAD 12:30 GMT: February Leading Indicators 0.4% vs 0.5% (MoM), January Retail Sales -0.3% vs 2.3% (MoM) and less Autos 0.4% vs 2%.
US 18:15 GMT: Federal Reserve Rate Decision expected 5.25%
The Risk Today:
EurUsd bull trend from 1.2865 remains intact with little resistance till the broader resistance 1.3370 set back in early December. Former 1.3290 resistance marks initial support before intraday support at around 1.3260. A break there would open the risk down toward 1.3180.
GbpUsd recent advance cleared 1.9500 and 1.9517 resistances. The outlook remains strong Sterling and the focus is now on the 1.9650 â€“ 1.9675 area, where a break would confirm the return in a strong positive trend. Former resistance 1.9517 marks the initial support. On a reversal downtrend, there is little support till 1.9375 and 1.9188. After that, focus will be on the 1.9146 Pivot support from last November.
UsdJpy continues its choppy consolidation phase, but as long as the 118.50 to 118.88 range resistance holds, we will keep our focus on the downside. A break of 115.76 and the 115.55 would clear the way for a run at the 115.15 trend low from early March.
UsdChf remains under pressure after the break of former support at 1.2146 (61.8% retracement of 1.1881 â€“ 1.2575 advance). A return below 1.2104 would expose the 1.1984. There's little support below there till the 1.1881 early December low. Next strong support is 1.1984. Initial resistance is 1.2217 last Thursday high.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.3666 T ||1.9850 P ||119.90 K ||1.2342 S |
|1.3480 S ||1.9750 S ||118.88 M ||1.2263 M |
|1.3370 S ||1.9675 T ||118.50 S ||1.2217 M |
|1.3315 ||1.9615 ||117.25 ||1.2120 |
|1.3290 M ||1.9517 M ||115.15 M ||1.2030 S |
|1.3180 S ||1.9188 S ||114.44 S ||1.1984 P |
|1.3074 S ||1.9146 P ||114.07 S ||1.1881 T |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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