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Monday April 2, 2007 - 10:01:48 GMT
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ACM - www.ac-markets.com
Dollar declined on news of US duties on Chinese paper
By Jean-Claude Braha - ACM Senior Trader
News and Events:
The Dollar declined on Friday after the US government said it will impose duties on imports of coated paper from China, raising fears of protectionism between the two economic superpowers. The impact on Foreign Exchange markets was immediate because a trade war, with duties imposed by both sides, would hurt demand for US export by making them more costly in foreign markets and slowing US economic growth. It would also make imports to the United States more expensive, adding to inflation pressures. A trade war could also prompt China to diversify some of its foreign exchange reserves out of the US Dollar. China has more than a trillion dollars in Forex reserves, the world's largest holding, and analysts estimate about 70% of it is denominated in US Dollars.
The Dollar was also hurt by rumors that Washington had advised citizens in Bahrain to leave. But the White House did not confirm it. Oil closed slightly down on Friday after the Bahrain rumor; Crude prices had climbed previously as the dispute between Iran and Britain over captured Royal Navy personnel showed no sighs of a quick resolution. The UK and Iran tensions are on top of moves by the US and other Western countries to pressure Iran into giving up its nuclear enrichment program.
Earlier on Friday, the Dollar showed little reaction to the jump in Chicago PMI to 61.7 in March from 47.9 in February. Forecast was 49.2. A reading above 50 indicates expansion.
The Swiss franc, traditional safe-haven currency, benefited from Middle East concerns; UsdChf was down -0.21% to 1.2151 after hitting 1.2084 intraday low. EurUsd rose 0.2% to 1.3356 after making 1.3401 high. UsdJpy slipped -0.25% to 117.81 in volatile trade posting 118.40 high and 117.81 low.
Today's Key Issues:
EUR 08:00 GMT: March Euro-zone Purchasing Managers Index Manufacturing 55 to 56 vs 55.6
GB 08:30 GMT: March Purchasing Managers Index Manufacturing 54 to 56.5 vs 55.4, 4Q Bank of England Equity withdrawal previously Â£11.8B
US 14:00 GMT: March ISM Manufacturing 51 vs 52.3
US 16:30 GTM: Fed's Poole speaks to Economists in New York
JPN 13:50 GMT: March Monetary Base previously -21.1%
The Risk Today:
EurUsd continues to hold above 1.3260 from last 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. Focus remains on the 1.3411 trend high from previous week, with strong resistance at the 1.3480 reaction March 11 high.
GbpUsd outlook remains positive and keeps market focus on resistance at the 1.9750. Former 1.9675 resistance has been cleared and open the positive trend toward 1.9750. Except 1.9850, there is little resistance above there until the 1.9917 late January high. Initial support is 1.9675 (former resistance) followed by 1.9582 and 1.9571.
UsdJpy consolidation phase continues to hold below the 118.50 to 118.98 resistance band keeping the broader bearish tone intact. Recent downward pressure from last week 118.44 high will need to break down 116.37 to clear the way for a run at the 115.15 trend low from early March. Initial support is 117.17.
UsdChf is holding below resistance at 1.2230 and last Friday's high 1.2240. But it will take a break of the 1.2080 to mark a return of the broader bear trend and open the door toward its 1.2030. Lower than 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 ||1.9917 T ||119.90 K ||1.2342 S |
|1.3480 S ||1.9850 P ||118.88 M ||1.2263 M |
|1.3411 M ||1.9750 S ||118.50 S ||1.2230 S |
|1.3350 ||1.9705 ||117.70 ||1.2155 |
|1.3260 S ||1.9675 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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