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Thursday March 29, 2007 - 12:31:58 GMT
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ACM - www.ac-markets.com
Dollar dropped against Yen on Bernanke comments
By Jean-Claude Braha - ACM Senior Trader
News and Events:
The Dollar suffered its biggest slide against the Yen in two weeks on Wednesday after Federal Reserve Chairman Ben Bernanke suggested a slowing housing market has clouded the US economic outlook but likely to be contained. The sell-off in the Dollar started overnight after rumors of conflict between the United States and Iran. That triggered a sharp spike in oil prices and falls in stocks and forced investors to unwind risky carry trades.
Euro-zone M3 money supply growth ticked up to 10% in February (17 year high) from a upwardly revised 9.9% in January. This continued strength provides further evidence that the ECB's work is not yet done. ECB will continue to see upside risks to inflation from the money supply for some time yet and that at least one hike in interest rates to 4% remains likely due for June.
US durable goods orders rebounded by 2.5% in February (MoM). Market was looking for a more substantial 3.5% rebound and January's already large 8.4% decline was revised to an even bigger 9.3% drop. This data may raise the chances of a rate cut later this year.
The Fed Chairman Ben Bernanke's congressional testimony was surprisingly upbeat on the economic outlook. However, it doesn't fundamentally change the view that the Fed will cut rates in late June. Bernanke was at his most optimistic in suggesting that the sub-prime crisis was ‚Äúlikely to be contained‚ÄĚ and have little impact on the wider economy. He added the key upside risk to inflation is the high rate of resource utilization (low unemployment rate). Analysts expect payroll gains slip over the coming month and the fed to cut rates.
UsdJpy was down -0.9% to 116.92 after hitting an intraday low 116.39 after Bernanke's remarks. EurUsd traded within ranges, down -0.31% to 1.3309 and UsdChf rose 0.41% to 1.2172. In high-yielding currencies, AudJpy fell -1.08% to 94.26 and NzdJpy dropped -1.93% to 82.91 as investors reduced risks.
Today's Key Issues:
GB 09:30 GMT: February M4 Money Supply previously 0.9% (MoM) and 12.8% (YoY), Bank of England consumer credit ¬£1B vs ¬£1.06B, Mortgage approvals 117k vs 120k, Mortgage Lending ¬£9.4B vs ¬£9.57B.
GB 11:00 GMT: March CBI Distributive Trades survey ‚Äď Realized 20 vs 19, April CBI Trades survey ‚Äď Expected 18 vs 16
EUR 13:00 GMT: European Central Bank's Trichet speak in Madrid
USD 13:30 GTM: Fed's Lacker gives opening remarks at Washington
US 13:30 GMT: 4Q Gross Domestic Product Price Index 1.7% unchanged and annualized 2.2% unchanged, 4Q Personal Consumption 4.2% unchanged, Core Personal Consumption Expenditure 1.9% unchanged (QoQ), March 24 Initial Jobless Claims 316k to 320k vs 316k
US 15:00 GMT: Fed's Kohn testifies on Industrial Loan Companies
US 17:00 GMT: Fed's Stern speaks on Federal Reserve at University of Dayton
CAD 18:15 GMT: Bank of Canada's Dodge speaks in New York City
EUR 23:00 GMT: French Unemployment Rate 8.5% vs 8.6%
NZD 23:45 GMT: 4Q Gross Domestic Product 0.9% vs 0.3%
JPN 00:30 GMT: February Jobless Rate 4% unchanged, Personal Income 0.7% unchanged, Overall household spending 0.7% vs 0.6% (YoY), National Consumer Price Index -0.1% vs 0% (YoY), Industrial Production -0.9% vs -1.7% (MoM)
The Risk Today:
EurUsd defined support at 1.3260 following Monday's rebound and a break of this support is required to trigger a fresh round of weakness opening 1.3200 (61.8% retracement of the 1.3072-1.3412 rally). A break there would open the risk down toward 1.3180. On the upside, focus is on the 1.3411 minor resistance from last week, with a strong resistance at the 1.3480 March 11 high.
GbpUsd outlook remains positive and keeps market focus on resistance at the 1.9750. First 1.9675 initial resistance must be cleared to open the way for advance toward 1.9750. Except 1.9850, there is little resistance above there until the 1.9917 late January high. Supports remain at 1.9582 and 1.9571.
UsdJpy consolidation phase continues to hold below the 118.50 to 118.98 resistance band. Recent downward pressure from Monday's 118.44 high, penetrated mild support at 116.92 before bouncing off 116.37 Wednesday's low, but it will take a break of 115.76 to clear the way for a run at the 115.15 trend low from early March.
UsdChf has defined 1.2230 and 1.2076 as the key intraday directional triggers with lower key support at 1.2020 trend low. It will take a break down 1.2076 to get the underlying bear trend back for a run toward 1.2030; after that, there is little support till the 1.1881 early December low. On the topside, a break of 1.2230 would instead reinstate a short-term bullish theme.
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 |
|1.3343 M ||1.9675 T ||118.50 S ||1.2230 S |
|1.3320 ||1.9650 ||117.40 ||1.2170 |
|1.3260 S ||1.9582 M ||117.17 S ||1.2030 S |
|1.3200 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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- POTENTIAL PRICE RISK: HIGH Tue-- 08:30 GMT GB- CPI top tier confirmation of Inflation.
- POTENTIAL PRICE RISK: Medium Tue-- 09:00 GMT DE- ZEW Survey second most important German monthly Survey.
- POTENTIAL PRICE RISK: Medium Tue-- 09:00 GMT EZ- final HICP revision to flash report. Revisions are usually minor.
- POTENTIAL PRICE RISK: Medium Tue-- 13:15 GMT US- Industrial Production. Top output indicator.
- POTENTIAL PRICE RISK: Medium Wed-- 12:30 GMT US- Housing Starts and Permits revision to flash report. Useful housing leading indicator.
- POTENTIAL PRICE RISK: Medium Wed-- 14:30 GMT US- EIA Crude. Top WTI inventory measure.
- POTENTIAL PRICE RISK: Medium Thu-- 01:30 GMT AU- Employment. Top economic indicator.
- POTENTIAL PRICE RISK: Medium Thu-- 02:00 GMT CN- GDP. Top economic indicator.
- POTENTIAL PRICE RISK: HIGH Thu-- 08:30 GMT GB- Retail Sales. Top consumption indicator.
- POTENTIAL PRICE RISK: Medium Thu-- 12:30 GMT US- Weekly Jobless. Employment Indicator.
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