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Thursday May 31, 2007 - 08:49:11 GMT
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ACM - www.ac-markets.com
Federal Reserve reiterates inflation risk
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland
News and Events:
The dollar rose on Wednesday, touching a seven-week high against the Euro, as minutes from the Federal Reserve's last meeting reiterated policy-makers' view that inflation remains a top concern. In the Fed minutes, they said risks to economic activity are tilted to the downside while the risk that inflation may fail to ease is still the bank's predominant concern. Some economists now expect the Fed will eventually have to raise rates, joining the European Central Bank, the Bank of England and the Bank of Canada., which are all expected to tighten policy at least once more this year to contain inflation pressures.
EurUsd was down -0.15% at 1.3433 having earlier dipped to 1.3407, the lowest since April 11. GbpUsd went down -0.23% to 1.9761. UsdJpy was unchanged at 121.57. The 6.5% fall in Chinese stocks appeared not to have slow investors' risk appetite, and more specifically, Carry-trades. Chinese stocks fell in response to the government raising a tax on stock trades.
Dollar is steady this morning as investors await a slew of upcoming US data that could further cool expectations for the Federal Reserve to trim interest rates later in the year. Revised US data on first quarter Growth precedes a group of key indicators due Friday, including the May payrolls report and a snapshot of manufacturing activity that will show whether the economy is picking up.
Today's Key Issues (time in GMT):
08.30 GB April M4 Money Supply 1.4% unchanged (MoM)
08.30 GB April M4 Money Supply 13.3% unchanged (YoY)
08.30 GB April BoE Consumer Credit Â£ 0.9B vs Â£0.88B
08.30 GB April Mortgage Lending Â£9.7B vs Â£9.9B
08.30 GB April Mortgage Approvals 110k vs 113k
09.00 EUR May Euro-zone Consumer Confidence survey -3 to -4 vs -4
09.00 EUR May Euro-zone Business Climate survey 1.60 vs 1.61
09.00 EUR May Euro-zone Economic Confidence survey 111 vs 111
09.00 EUR May Euro-zone Industrial Confidence survey 6 vs 7
09.00 EUR May Euro-zone Service Confidence survey 22 vs 22
09.00 EUR May Euro-zone CPI (flash estimate) 1.9% vs 1.9% (YoY)
12.30 CAD March Gross Domestic Product 0.5% vs 0.4% (MoM)
12.30 CAD 1Q Gross Domestic Product 3.3% to 3.5% vs 1.4%
12.30 CAD 1Q Gross Domestic Product Deflator 5% vs 1.3% (YoY)
12.30 US 1Q Gross Domestic Product 0.8% vs 1.3% (MoM)
12.30 US March Gross Domestic Product Price Index 4% vs 4%
12.30 US 1Q Core Personal consumption Expenditure 2.2% vs 2.2%
12.30 US March Personal consumption 3.4 to 4.1% vs 3.8%
12.30 US May 26, Initial Jobless Claims 310k vs 311k
13.45 US May Chicago Purchasing Manager Index 54 vs 52.9
14.00 US April Construction Spending 0% vs 0.2% (MoM)
14.00 US 1Q House Price Index 0.5% vs 1.1%
The Risk Today:
EurUsd recent recovery from the 1.3407 short-term trend low followed a corrective path from 1.3521 resistance. This subsequent decline is likely to resume the bear trend where a break of 1.3407 Wednesday's low would clear the way for a run at 1.3370 (38.2% retracement of 1.2865-1.3683).
GbpUsd recent sell-off from 1.9900 Tuesday's high is likely marking a resumption of the bear trend. Market even reversed under 1.9770 support and Tuesday breakout. On the lower side, further pressure below 1.9734 yesterday low would open the door toward the 1.9677 trend low and 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 resistance. Support lies at 120.86, last Friday low.
UsdChf recent corrective pullback likely bottomed Tuesday at 1.2200. Only a break of the 1.2127 low from May 15 however would turn the short-run tone bearish. Until then, we'll keep focus on the 1.2356 resistance (61.8% retracement of the 1.2575-1.1994 decline). Minor support is in the 1.2238 yesterday 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 M |
|1.3445 ||1.9750 ||121.60 ||1.2250 |
|1.3416 T ||1.9677 T ||120.54 M ||1.2238 M |
|1.3395 S ||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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