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Thursday March 22, 2007 - 10:14:38 GMT
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ACM - www.ac-markets.com
Fed holds rates steady but changes language
By Jean-Claude Braha - ACM Senior Trader
News and Events:
The Federal Reserve held interest rates steady at 5.25% on Wednesday and said it remained uneasy about inflation, but dropped an explicit reference to the possibility of taking rates higher, leaving its option open. However, the market sees as evidence that the Fed is no longer leaning toward higher rates, officials said that "future policy adjustments would depend on the evolution of the outlook for both inflation and economic growth". Financial markets took the actual wording as possibility for lower interest rates. In a statement outlining its decision, the Fed acknowledged recent signs of uneven economic growth and weakness in the housing sector, but expressed continued faith the economy was fundamentally sound. It also made clear, it is still worried about inflation; "the committee's predominant policy concern remains the risk that inflation will fail to moderate".
EurUsd jumped to a two-year high at 1.3412 before closing at 1.3397 +0.61% on Wednesday after the Federal Reserve held interest steady but opened the possibility for further interest rate increases. Euro has been very volatile because market expects more Euro-zone interest rate hikes this year from the current 3.75%. Dollar also weakened against Sterling, GbpUsd rose to 1.9681 +0.34% after hitting high of 1.9697. UsdJpy rose only 0.14% to 117.43 after hitting intraday high 117.95. AudUsd went strongly up 0.56% to 0.8085 near its highest level sing December 1996.
Today's Key Issues:
GBP 09:30 GMT: February Retail Sales 0.6% vs -1.8% (MoM) and 3.7% vs 3.3% (YoY)
EUR 10:00 GMT: January Euro-zone Trade Balance -â‚¬7B to +â‚¬3.5B vs â‚¬2.5B, January Euro-zone Industrial New Orders seasonally adjusted -1.0% vs 2.8% (MoM)
GBP 11:00 GMT: March CBI Industrial Trend survey -2 to 6 vs 4
US 12:30 GMT: March 17th Initial Jobless claims 313k to 330k vs 318k
US 13:20 GMT: Fed's Bernanke speaks on Credit Markets in North Carolina
US 14:00 GMT: February Leading Indicators -0.8% to -0.3% vs 0.1%
US 16:00 GMT: Fed's Lacker speaks at Conference North Carolina
US 16:30 GMT: Fed's Kroszner speaks on Credit Markets North Carolina
US 17:30 GMT: Fed's Kohn speaks on Credit Risk at Washington
AUD 23:00 GMT: January Conference Board Leading Index previously 0.2%
JPN 23:50 GMT: January All Industry Activity index 0.6% to 0.7% vs 0%
The Risk Today:
EurUsd the bull trend from 1.2865 remains intact and the break of extreme at 1.3370 set back in early December opens scope for gains towards 1.3480, March 2005 high. Yesterday high 1.3412 marks the initial resistance. Meanwhile, Former 1.3290 resistance marks initial support before 1.3260 strong. A break there would open the risk down toward 1.3180.
GbpUsd is back in a positive trend following the push through last Friday's 1.9500 high and the 1.9517 former resistances. A clear break of 1.9675 will confirm the rally and push toward next resistance at the 1.9750 early February high. Mild support is around 1.9555, yesterday's low and 1.9517 former resistance marks minor support.
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). The yesterday break of 1.2103 exposes the 1.1984, next strong support. But there's little support below there till the 1.1881 early December low 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 |
|1.3412 M ||1.9675 T ||118.50 S ||1.2217 M |
|1.3375 ||1.9675 ||117.35 ||1.2095 |
|1.3370 M ||1.9517 M ||115.15 M ||1.2030 S |
|1.3260 S ||1.9188 S ||114.44 S ||1.1984 P |
|1.3180 S ||1.9146 P ||114.07 S ||1.1881 T |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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