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Monday October 1, 2007 - 12:17:30 GMT
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ACM - www.ac-markets.com
Dollar fell to record lows against major currencies on Friday
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland
News and Events:
The Dollar fell to record lows against the Euro and a basket of major currencies on Friday after economic data supported views the Federal Reserve would cut interest rates again to shore up sluggish growth. More monetary easing, on top of a half a percentage point reduction in the federal funds rate two weeks ago to 4.75%, would further erode the appeal of dollar-denominated assets.
Forex market sentiment on the Dollar remains very bearish. As long as we keep getting weak US economic data and as the market builds short-Dollar positions ahead of another rate cut by the Fed next month, the EurUsd is bound to test the 1.4500 level.
Friday news of a muted rise in a monthly measure of Core Consumer Prices, which excludes volatile food and energy items, lifted the EurUsd to an all-time high of 1.4278. It was last trading 0.82% higher at 1.4273.
The mild rise in Consumer Prices may be reassuring to Fed policy-makers, who have been closely monitoring the economy for any indication that inflation pressures might be building. The Euro has gained 4.3% versus Dollar in September and 4.9% during the quarter, the largest increase since the second quarter of 2006.
The third quarter has been focus to the Yen, which has benefited as investors unwound risky trades in the wake of a growing liquidity crisis that began in the US sub-prime mortgage market. The Dollar has dropped 6.6% against the Yen in the last three months, the biggest quarterly decline since the fourth quarter of 2004. UsdJpy fell 0.64% to 114.80 on Friday. Against the Swiss franc, the Dollar was also down 0.81% to 1.1633. UsdCad dropped 0.78% to 0.9937, leaving parity further behind.
The market was little moved by separate reports showing a modest rise in the pace of business activity in the US Midwest region in August, while Consumer Sentiment was unchanged in late September from August. Forex analysts said market focus has shifted to speeches by various Fed officials for clues on the size of next month's expected interest rate cut.
Today's Key Issues (time in GMT):
08.30 UK Aug BoE consumer Credit Â£0.9B vs Â£1.1B
08.30 UK Sept CIPS/NTC Manufacturing PMI 55.6 vs 56.3
08.30 UK Aug Mortgage Approvals 110k vs 115k
08.30 UK Aug mortgage Lending Â£9B vs Â£9.19B
12.00 UK Alan Greenspan Interview, Chatham House, London
14.00 US Sept ISM manufacturing Index 52.6 vs 52.9
14.00 US Sept ISM Prices Paid 63 in August
17.30 UK Alan Greenspan speaks at the London School of Economics
23.30 JPN Sept Monetary Base 0.7% in August
Holiday in China all this week.
Holiday in Hong Kong today
The Risk Today:
EurUsd trend remains positive. Market hit all time high 1.4282 this morning, which marks initial resistance before a new extension to 1.4291 and 1.4333 strong resistance. Initial support holds 1.4165 former resistance. Nearby support cuts at 1.3927 where a lower development would threaten the up-trend, but it would need a return below 1.3719 to confirm trend change.
GbpUsd recent trend continue to suggest Sterling will remain strong. Last Friday, key resistance 2.3063 has been broke and open the way for further gains toward 2.0660 July high.Former resistance 2.0363 is holding initial support. A return below it would expose further downside. But it would need a return below 2.0000 psychological level and 1.9880 support to confirm trend change.Beyond that point, 1.9821 marks strong support (76.4% retracement of 1.9652 to 2.0366 advance).
UsdJpy The downtrend remains intact below 117.13 major resistance. Confirmation over this level is needed to relieve the negative tone and open the way for an extend toward 119.36 (61.8% retracement of 124.15 to 111.60 decline). On the downside, a return below 113.39 (Sept. 11 low) would open the way toward 112.61 and a possible retest of 111.60 (August 17 low).
UsdChf remains negative in recent downtrend after having broken 1.1816 former key support and moreover Friday break of 1.1680 support. Further weakness will open the way down to 1.1500 psychological support and possibly 1.1484 (2005 March 14 low). However, on the uptrend, a recovery beyond 1.1923 and 1.1962 is needed to relieve the actual bear threat.
Resistance and Support:
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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