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Monday May 7, 2007 - 09:07:03 GMT
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ACM - www.ac-markets.com
Soft payrolls data; Sarkozy wins; Euro up.
By James Brandt - ACM Advanced Currency Markets, Geneva, Switzerland
News and Events:
April non-farm payrolls expanded by 88k, well below the 100k estimate, the slowest growth in two years. The unemployment rate increased by 0.1% to 4.5% (expected). The dollar continues to weaken against all currencies on clear signs that the US economy is slowing and investors are looking for higher-yielding investments, namely in Europe, Australia and New Zealand. The IMF forecasts that Europe and Japan will grow faster than the US for the first time in 5 years and 16 years respectively.
However, the weakened dollar has boosted US overseas sales and has caused swings in European corporate profits. Should the strong Euro hurt employment in the euro-zone remains to be seen. Regardless, traders eye $1.3800 in the short term and $1.4000 later this year.
The market showed minor reaction to Nicolas Sarkozy's win in France's presidential election. Although Sarkozy did mention in his speech last night that he believed the Euro was â€śtoo strongâ€ť, traders were not rattled as such a statement was expected from the presidential front-runner.
Don't trade against the trend. In today's most interesting chart we can see why. The Cable has been in a strong bull trend in the past 12 months and shows no sign of stopping primarily based on the interest rate outlook and slowing US economy. Traders target the record high of 2.0133 in the near term. The relative strength index (14) shows a bullish bias without being overbought.
Today's Key Issues (time in GMT):
10:00 EUR German Factory Orders, seasonally adjusted (MoM) (MAR) -0.6% vs 3.9%
10:00 EUR German Factory Orders, not seasonally adjusted (YoY) (MAR) 9.8% vs 9.3%
12:30 CAD Building Permits (MoM) (MAR) 3.5% vs -22.4%
17:30 EUR ECB's Tumpel-Gugerell Speaking in Brussels
19:00 USD Consumer Credit (MAR) $4.0B vs $3.0B
The Risk Today:
EurUsd: Bouncing off of 1.3535 last week, the Euro has regained its strength back into the middle of the range. Look for a break of 1.3622 for a second leg to 1.3681, the all-time tradable high. For the bears, a break of 1.3535 is very bearish.
GbpUsd: Trading upwards, major resistance is found at 2.0133. The pair is well supported at 1.9845; any break below that is very bearish.
UsdJpy: The pair slipped again in early trading, however as it approaches the trend-line at 119.65. Bulls will fuel a break above 119.14 and a push to 119.50. Bears want to see a break and close below 119.65.
UsdChf This pair is set-up for a big break. Bouncing off of two trend lines of a triangle formation since December 2004, major trend resistance is found at 1.2160 and support at 1.1985. Look for a break of either of these levels to confirm new direction.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.3700 S ||2.0177 K ||121.81 T ||1.2288 S |
|1.3685 K ||2.0135 S ||120.63 K ||1.2192 S |
|1.3623 M ||2.0075 M ||120.40 S ||1.2160 T |
|1.3604 ||1.9965 ||119.93 ||1.2091 |
|1.3542 K ||1.9730 M ||119.70 T ||1.2052 M |
|1.3458 T ||1.9576 S ||118.90 S ||1.1995 S |
|1.3413 S ||1.9516 T ||118.12 S ||1.1985 T |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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