Friday September 17, 2004 - 09:41:46 GMT
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US OPEN MARKET POINTS 09-17-04
As our technical brethren have repeatedly written, every chart of the majors is compressing to a point of practical standstill. In the past two weeks the EUR/USD range narrowed to less than 200 points bouncing between 2250-2050. The yen meanwhile traded even tighter - trapped between 109 and 110. Even sterling which dropped approximately 700 points in the last two weeks of August has been contained between ever tightening boundaries of 7950-7750. Summer doldrums were supposed to be over. What’s going on?
Fundamentally not much. We’ve entered a period global slowdown which has exposed each region’s weakness and forced many investors to the sidelines to await some economic clarity. Presently, the FX market is clearly in the control of purely speculative flow which is highly reactive to every economic release of the moment. As we suspected, the dollar did indeed unwind its gains against the euro yesterday, although the culprit was not the TIC data but the weaker than expected Philly Fed report. Regardless of the catalyst, the end result was the same – the pair rallied right back to where it started two days before. Range trading continues and only becomes narrower with each passing day.
With a very light calendar we do not anticipate much volatility today unless the U of M Consumer Confidence report surprises wildly to the upside or the downside. Dealers are already positioning for next Tuesday’s FOMC meeting where a 25bp rate hike to 1.75% is expected. More importantly the market will focus on the wording of the Fed announcement to gauge its near term policy intentions. However, given the recent contradictory statements from Fed officials, the Fed seems as perplexed as the market about the direction of the economy. The clear cut resolution of currency prices that so many market players eagerly await may yet be a long way off.
FX Spot Overnight
- EUR trades tight around 2200 but with upward bias
- JPY pokes through 110 yet again ahead of Monday’s holiday and Tuesday’s FOMC
- GBP consolidates around 7940 maintaining the rally gains
- CHF dormant below 2700
12:00GMT – (8:00 AM EST) CAD Consumer Price Index m/m (August) Expected at 0.2%, Previous -0.1%
12:00GMT – (8:00 AM EST) CAD Consumer Price Index y/y (August) Expected at 2.1%, Previous 2.3%
12:00GMT – (8:00 AM EST) CAD CPI ex-core m/m (August) Expected at 0.2%, Previous 0.2%
12:00GMT – (8:00 AM EST) CAD CPI ex-core y/y (August) Expected at 1.9%, Previous 1.9%
12:00GMT – (8:00 AM EST) CAD LEI m/m (August) Expected at 0.6%, Previous 0.6%
13:50GMT – (9:50 AM EST) USD U of M Confidence (September) Expected at 96.7, Previous 95.9
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