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Monday May 21, 2007 - 10:13:44 GMT
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ACM - www.ac-markets.com
Yen edges higher after China widens Yuan band
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland
News and Events:
The Japanese currency firmed marginally on Friday after China widened the Yuan's band against the US Dollar, with investors expecting this move would do little to speed up the pace of the Chinese currency's rise. The Yen, Asia's most liquid currency, which often trades as a proxy for the tightly controlled Yuan, initially jumped after China said it would allow the Yuan to rise or fall 0.5% against the Dollar daily, up from 0.3% in the current trading band. The Yen's gains were quickly reversed as many investors expect the People's Bank of China to keep a tight grip on the currency, and keep intervening to prevent a rapid appreciation that could slow export growth and hurt the economy.
China's move, which also included a rise in interest rates to slow economic growth, came ahead of a meeting between US Treasury Henry Paulson and China Vice-Minister Wu Yi this week.
The Yen has declined across the board this year as the lowest interest rates in the industrialized world, and declining volatility in other markets have encouraged speculators to borrow the currency to fund purchases of higher yielding assets.
US Dollar was little changed against most major currencies and failed to get a lift from a survey showing that US Consumers unexpectedly became more optimistic on the economy in May. The University of Michigan's measure of US consumer confidence rebounded to 88.7 in May, from 87.1, despite the continued surge in the price of gasoline at the pumps, which hit a record high of $3.14 a gallon last week. The expectations index rebounded to a 3-month high of 79.0, from 75.9, while the current conditions index actually declined to 103.8, from 104.6.
UsdJpy was down -0.13% to 121.13 after hitting 121.40 high on Friday. EurUsd was up 0.09% at 1.3509, far away from last month record peak of 1.3681. The biggest mover on Friday was the Canadian Dollar, which jumped to a near 30-year against the US Dollar after data showed domestic retail sales in March surged on booming automobile and gas sales. UsdCad fell -1.04% to 1.0886 after dipping as low as 1.0877.
Today's Key Issues (time in GMT):
Holiday in Canada
08.30 GB April Public Finance (PSNCR) Â£-1.5B vs Â£17.2B
08.30 GB April Public Sector Net Borrowing Â£1.5B vs Â£8.5B
08.30 GB M4 Money Supply 0.9% vs 1% (MoM)
08.30 GB M4 Money Supply 12.5% vs 12.8% (YoY)
08.30 GB M4 Money Lending Â£17.9B vs Â£12.7B
13.00 World Bank press conference
14.00 US Fed's Braunstein testifies on sub-prime, Cleveland
The Risk Today:
EurUsd The sharp break from 1.3612 is thus far holding above May 11 1.3458 low. Only a break there would undermine the underlying bullish long-term trend. Until then, look for a move above last Thursday's 1.3545 reaction high to revive the bull trend and bring focus back on the 1.3623 resistance. A break below 1.3458 would open 1.3370 (38.2% retracement of the 1.2865-1.3683 rally).
GbpUsd remains heavy, having broken through 1.9771 support (38.2% retracement of the 1.9184-2.0134 advance). Renewed slippage beyond 1.9746 would reinforce the heavy tone and pave the way for an extension to 1.9659 (50% retracement of the 1.9184 to 2.0134 advance). Only a return above last week's 2.0000 high would reverse the immediate heavy tone originating from the 2.0133 peak.
UsdJpy There's little resistance now until the 121.64 high from February 22. Maintain a bullish bias above last Friday's 119.48 low. Initial support is 120.54.
UsdChf maintains a bullish tone. Further gains beyond 1.2285 are needed to suggest the advance is anything more meaningful than a correction. Initial support is around last Wednesday's 1.2142 low. A clear break would target 1.2356, the March 9 high. Initial support is 1.2196 before 1.2142.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.3750 T ||2.0133 T ||122.22 T ||1.2356 S |
|1.3623 S ||2.0071 M ||122.05 M ||1.2309 S |
|1.3565 S ||2.0000 K ||121.64 S ||1.2285 P |
|1.3505 ||1.9735 ||121.30 ||1.2275 |
|1.3458 S ||1.9710 M ||120.54 M ||1.2196 M |
|1.3413 T ||1.9659 S ||119.55 T ||1.2142 M |
|1.3370 S ||1.9522 T ||118.90 S ||1.2002 T |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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