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Thursday April 19, 2007 - 09:14:50 GMT
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ACM - www.ac-markets.com
Interest Rate expectations remain the fundamental driver
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland
News and Events:
The Dollar fell to a 26-year low against the Sterling and traded near a record low versus the Euro on Wednesday, as expectations for US interest rate cuts contrast with anticipation for monetary tightening in Europe and Japan. Interest rates expectations remain the fundamental driver in this market, which should weigh on the Dollar. Analyst are looking for a slight increase in Japanese rates, hikes from the European Central Bank and Bank of England, and mostly steady to lower rates in the in the United States in coming months. For the rest of the week, analysts expect dollar weakness to remain the dominant theme since there are no major market-moving US economic data due.
Sterling rose as high as 2.0133 on expectations the BoE will raise interest rates by at least 25 basis points to 5.5% in May, which would top the US Federal Funds rate before ending at 2.0088. The Euro also slowly approached historic highs versus the Dollar, rising up to 1.3620 high, above 1.3600 for the first time in two years and coming within 46 ticks of record peaks sets in December 2004. Dollar was sold-off after Tuesday's data showed worth-than-expected US Consumer Price Inflation for March. The data contrasted with a jump in British Consumer Prices, which stoked expectations for a rate hike. Investors also continued to shift funds to the Euro after the ECB kept rates unchanged at 3.75% last week bur suggested it was likely to tighten credit in June of beyond to stem higher inflation. By contrast, most economists expect the Fed to cut its benchmark rates sometime this year, even though the US Central Bank has reiterated its main concern is still price pressures.
UsdJpy fell 0.39% to 118.36 and EurJpy traded little change at 161.16, pulling back from a record high 162.42 hit this week. AudUsd rose to a fresh 17-year high at 0.8394 +0.29%.
Today's Key Issues:
GB 9:00 GMT: ZEW Survey Expectations -20.5 vs -28
Euro 9:30 GMT: ECB's Bini Smaghi holds speech in Budapest
CAD 11:00 GMT: March Consumer Price Index 0.5% vs 0.7% (MoM) and 2% unchanged (YoY). March Bank of Canada Consumer Price Index Core 0.2% vs 0.5% (MoM) and 2.2% vs 2.4% (YoY)
CAD 12:30 GMT: February Wholesale Sales 0.1% vs -0.5% (MoM) and 2.2% vs 2.4% (YoY)
US 12:30 GMT: April 14th Initial Jobless Claims 325k vs 342k
US 14:00 GMT: March Leading Indicators 0.1% vs -0.5%
US 16:00 GMT: April Philadelphia Fed's Index 2.0 vs 0.2
US 19:50 GMT: Fed's Yellen gives brief remarks on Economic dev.
The Risk Today:
EurUsd has been consolidating recent gains, but overall, it keeps its overall uptrend intact. Last week's move above the 1.3482 former resistance leaves this bullish pattern with little resistance till the 1.3666 all-time high from December 2004. Last Friday's 1.3482 intraday low offers initial support. Recent advance had cleared 1.3554 and 1.3577 former resistances. Initial minor resistance is 1.3595.
GbpUsd has pushed above the 1.9917 (January 23 high) and 1.9946 (Elliott wave measured objective) resistance area, and most recently, the 2.0000 psychological round number. Sterling extended advance up to 2.0133 new high, breaking 2.0100 high from September 1992. Only a break of Monday's 1.9854 low would put the bull trend on hold in the short term. Initial support is at the 1.9864 Friday's high.
UsdJpy extended setback from Monday's 119.88 high and broke 118.22 support from last Friday's low. This put the underlying short-term bull trend on hold. The bull trend has little resistance above its 119.88 current extreme and the nearby 120 psychological round number till 120.54 (76.4% retracement of the 122.20-115.15 decline). Initial minor support is 117.73 before 116.82 strong support. Still away from trend low 115.15 trendline support.
UsdChf recent weakness has little support below last Friday's 1.2068 low till the 1.2030 mid-March low. Initial resistances are at last Friday high 1.2190 and last Wednesday's 1.2247 peak, but only a move above previous week 1.2285 high would offset the current bearish tone. Initial resistance is at 1.2151 yesterday high. Initial support is 1.2030.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.4848 T ||2.0305 T ||120.00 T ||1.2285 P |
|1.3666 T ||2.0100 T ||119.90 K ||1.2247 S |
|1.3595 M ||2.0085 M ||119.49 S ||1.2190 M |
|1.3570 ||2.0010 ||117.80 ||1.2035 |
|1.3525 M ||2.0000 M ||118.50 P ||1.2030 S |
|1.3482 M ||1.9864 S ||118.21 S ||1.1984 T |
|1.3395 S ||1.9850 P ||117.73 S ||1.1881 P |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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Mon 16 Oct /ul>
01:30 CN- CPI
21:45 NZ- CPI
Tue 17 Oct
08:30 GB- CPI
09:00 DE- ZEW Survey
09:00 EZ- Final HICP
Wed 18 Oct
12:30 US- Housing Starts & Permits
14:30 US- EIA Crude
Thu 19 Oct
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John M. Bland, MBA
- 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.
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