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Friday March 30, 2007 - 08:59:29 GMT
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ACM - www.ac-markets.com
Dollar rose against Yen, helped by US GDP and new risk appetite
By Jean-Claude Braha - ACM Senior Trader
News and Events:
The Dollar rose against the Yen on Thursday in its biggest one-day percentage gain in almost three weeks after data showed the US economy grew at a faster pace in the 4Q than initially reported. Investors have also re-entered risky carry trades, which involve borrowing the low-yielding Yen to fund purchase of other assets with higher interest rates, such as the Australian and New Zealand dollars.
NzdJpy, highest interest rates in the industrialized world at 7.5% compared with just 0.5% in Japan, climbed just under 1.86% to 84.45; easily erasing the previous day's slide. AudJpy also posted gains, rising 1.17% to 95.36.
US GDP report showed the US economy may be more resilient than many initially thought and supported growing expectations the Federal Reserve may hold interest rates steady for some time. US 4Q GDP growth was revised up modestly to 2.5% from 2.2% in the final estimate. However, it is still below the initial estimate of a 3.5% increase.
Main focus was the return of the market's risk appetite, traders and analysts said. That was following the Fed Chairman Bernanke's statement on Wednesday, when he gave a more balanced view of the US economy. Bernanke acknowledged risks from the weak housing market, but confirmed that inflationary pressure remains. The market interpreted that to mean the Fed is not ready to reduce US interest rates just yet. US government on Thursday said it remains committed to pursuing a diplomatic resolution of tension in the Middle East, which calmed investors as they await the next monetary policy move from the Fed.
UsdJpy rose to day's high of 118.20 earlier as traders expected strong demand to buy dollars would emerge from Japanese companies, which are closing their books on the fiscal year.
Investors will closely watch the core PCE, the Fed's favored inflation gauge, price index for February. Other data due on Friday includes Chicago PMI for March, February's Construction Spending and Final release of March Consumer Sentiment Index of the University of Michigan.
Today's Key Issues:
EUR 10:00 GMT: March Euro-zone consumer Price Index 1.9% vs 1.8% (YoY), Economic Confidence 109.5 to 109.7 vs 109.7, Consumer Confidence -4 vs -5, Industrial Confidence 5 unchanged, Unemployment Rate 7.3% vs 7.4%
GB 10:30 GMT: March GFK Consumer Confidence -7 to -8 vs -8
CAD 13:30 GMT: February Industrial Product Price Index 0.3% to 0.7% vs -0.1%, Raw materials Price Index 1% to 2.5% vs -3.1%
USD 13:30 GTM: Fed's Plosser speaks at Financing Community Dev.
US 13:30 GMT: February Personal Income 0.3% vs 1%, Personal Consumption adjusted 0.2% to 0.3% vs 0.5%, Personal Consumption real 0.2% vs 0.3%
CAD 13:30 GMT: January Gross domestic Product 0.2% vs 0.4%
US 14:45 GMT: March Chicago Purchasing Managers' Index 49.2 to 50.5% vs 47.9%
US 15:00 GMT: February Construction spending -0.6% to -0.8% vs -0.8%, Michigan Consumer Sentiment 88.5 to 88.8 vs 91.3
US 17:00 GMT: Fed's Bernanke speaks at financing Community Dev.
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 |
|1.3411 M ||1.9675 T ||118.50 S ||1.2230 S |
|1.3330 ||1.9590 ||118.00 ||1.2185 |
|1.3260 S ||1.9582 M ||117.17 M ||1.2030 S |
|1.3200 S ||1.9188 S ||116.76 S ||1.1984 P |
|1.3180 S ||1.9146 P ||115.15 T ||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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