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Friday March 23, 2007 - 09:55:35 GMT
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ACM - www.ac-markets.com
Dollar rose as US rates may hold for some time.
By Jean-Claude Braha - ACM Senior Trader
News and Events:
The Dollar rose on Thursday recouping part of the prior session's losses on the view that the Federal Reserve may continue holding interest rates steady for some time. The Fed left borrowing costs at 5.25% on Wednesday but dropped language used in earlier policy statement that signaled it was more inclined to fight inflation by tightening credit than to promote growth by cutting rates. That shift pushed the EurUsd to a two-year high as markets took that to mean a rate cut very soon. But analysts seems to have re-evaluated their statements and lately reported that the Fed was keeping a close eye on inflation, which would suggest that the Central Bank sees no need to rush on a rate cut.
Recent worries about the health of the US economy, including soft manufacturing data and rising defaults in home loans to borrowers with impaired credit, have weighted on the Dollar. Also, analysts said the Fed's change of tone suggest the Central Bank is making sure it drive the economy into a soft landing.
Yesterday, the Dollar also got a lift from a Jobless Claims report showing an unexpected fell of new claims for jobless benefits last week. Initial filings fell for the third straight week, dropping to 316k in the week ended March 17th from a revised 320k for the previous week. Analysts said such data showing the labor market remains healthy should ease fears that sup-prime mortgage defaults will damage the broader economy by limiting access to credit and slowing consumer spending.
Investors will be looking ahead of today report on US Existing Home Sales.
EurUsd fell -0.48% to 1.3333 after hitting intraday high 1.3411. UsdJpy was up 0.59% to 118.12 and UsdChf went as high as 1.2182 before closing 0.45% to 1.2142. Meanwhile, the AudUsd touched a fresh 10-year high of 0.8094 as investors expect Australian's Central Bank to raise rates early next month.
EurGbp bull trend looks vulnerable and the recent break 0.6819 give a first confirmation of a reversal. Nest support is 0.6779, where a break would open the door for a run toward 0.6722.
Today's Key Issues:
EUR 09:00 GMT: January Euro-zone Trade Current account previously â‚¬2.3B and â‚¬5.0B not seasonally adjusted
EUR 11:00 GMT: ECB's Stark speaks at Conference in Berlin
US 12:30 GMT: Federal Reserve's Lacker speaks on liquidity risk
US 13:15 GMT: Federal Reserve's Plosser speaks to N.J. Bankers in West Palm Beach
US 14:00 GMT: ECB's Papademos speaks in Amsterdam
US 14:00 GMT: February existing Home Sales 6.35M vs 6.46M, monthly change -1.7% vs 3.0%
US 15:30 GMT: Fed's Geithner speaks at Credit Markets Symposium
US 15:30 GMT: Fed's Lacker gives introductory remarks at conference
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. Wednesday high 1.3412 marks the initial resistance. Meanwhile, Former 1.3290 resistance marks initial support before 1.3260 strong support. A break there would open the risk down toward 1.3180.
GbpUsd remains positive following the push through last Friday's 1.9500 high and the 1.9517 former resistances. Trendline 1.9675 resistance might be cleared again. Then, the rally will approach resistance at the 1.9750 early February high. Minor support is around 1.9555 and 1.9517 former resistance marks the following minor support.
UsdJpy continues its choppy consolidation phase, but as long as the 118.50 to 118.88 range resistance holds; focus remains 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) and the return to this current level. A break of 1.2103 would again expose 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 |
|1.3335 ||1.9655 ||118.15 ||1.2150 |
|1.3370 M ||1.9555 M ||117.17 S ||1.2030 S |
|1.3260 S ||1.9188 S ||115.15 M ||1.1984 P |
|1.3180 S ||1.9146 P ||114.44 S ||1.1881 T |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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