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Wednesday May 30, 2007 - 08:12:43 GMT
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ACM - www.ac-markets.com
Japanese Yen rebounds after China stamp duty hike
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland
News and Events:
The Dollar slipped against the Euro on Tuesday, as comments by European Central Bank officials suggesting more Euro-zone rate increases prompted investors to book profits on recent Dollar gains. But the Dollar pared losses after a May US Consumer Confidence report showed a higher inflation outlook for the next 12 months, resulting in diminished expectations for interest rate cuts by the Federal Reserve. The Conference Board said its index of Consumer Sentiment came in unexpectedly high. More important for Currency traders, consumers' inflation expectations 12 months from now were 5.5% in May, the highest in a year. The Fed is considered more likely to raise interest rates when inflation is higher, making US Dollar investments more attractive.
Some analysts said ECB policy-maker's comments suggesting more euro-zone rate increases supported the euro. Their remarks reinforced the view that interest rates will move above the current 3.75%.
The Yen edged higher on Tuesday after China said it would raise a stamp duty on stocks in a bid to slow equity market gains, prompting concerns about risky trades financed by borrowing in the Japanese currency. Analysts said â€śChina's decision is a clear attempt to restrain the equity boomâ€ť. Euro retreated at 163.60 from a record high against the Yen at 164.28 on expectations China's move may prompt further losses in global equity markets.
Yesterday's biggest mover was the Canadian Dollar, which rose to a fresh 29 Â˝ year high against the Dollar at around 1.0712. The Bank of Canada held its key overnight interest rate unchanged at 4.25%, as expected, but said a near-term rate hike may be needed to slow inflation.
Today's Key Issues (time in GMT):
08.00 EUR April Euro-zone Money-M3 annual growth 10.7% vs 10.9%
08.80 EUR May Euro-zone Retail Purchasing Managers Index vs 54.6
12.15 US May ADP Employment change 115k to 120k vs 64k
12.30 CAD April Industrial Product Price Index 0.3% to 0.5% vs 1.3%
12.30 CAD April Raw Materials Price Index 0.9% vs 1.3% (MoM)
12.30 CAD 1Q Current Account CAD 7.0B vs 3.0B
14.00 EUR ECB's Liikanen speaks in Helsinki
17.00 UK Bank of England's Blanchflower speaks in London
18.00 US FOMC Meeting Minutes from May 9th
22.00 EUR April French unemployment rate 8.2% vs 8.3%
The Risk Today:
EurUsd outlook remains bearish with focus on the 1.3370 (38.2% retracement of 1.2865-1.3683) with momentum conditions also providing a bearish backdrop. Initial resistance is at last Wednesday's 1.3503 high, but only a move above 1.3545 resistance would halt downward pressures and revive the bull trend with focus on the 1.3623 resistance.
GbpUsd consolidation has taken on the appearance of a bull flag, which suggests further near-term gains are likely. A break above the recent 1.9896 high would pave the way for gains towards the 2.0000 keylevel. Mild support for now is at last Tuesday's 1.9770 breakout high. Renewed losses below 1.9716, Wednesday low, would however resume bear trend towards 1.9659 (50% retracement of the 1.9184 to 2.0134 advance).
UsdJpy bull trend remains intact with the focus on the January-February 122.10 to 122.22 highs. Last Wednesday 121.88 high would mark minor resistance before 122.05 (February high) next resistanceSupport lies at 120.86, last Friday low.
UsdChf maintains a bullish tone following the recent break of 1.2285 last Monday. This paves the way for gains towards the 1.2356 resistance (61.8% retracement of the 1.2575-1.1994 decline). Minor support is in the 1.2241 Wednesday's low.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.3750 T ||2.0133 T ||122.22 T ||1.2573 T |
|1.3623 S ||2.0000 K ||122.05 S ||1.2356 S |
|1.3545 S ||1.9875 S ||121.88 M ||1.2309 S |
|1.3450 ||1.9800 ||121.65 ||1.2250 |
|1.3416 T ||1.9770 M ||120.54 M ||1.2241 M |
|1.3397 M ||1.9659 S ||119.55 T ||1.2196 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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