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Wednesday October 31, 2007 - 13:26:21 GMT
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ACM - www.ac-markets.com
Dollar fell to record lows ahead of FOMC rate decision
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland
News and Events:
The Dollar fell to a record low against the Euro on Tuesday for the third consecutive session as the market looked ahead to the outcome of a Federal Reserve meeting with most expecting an interest rate cut.
Dealers seemed intent on heading into the meeting with hefty bets against the Dollar, forecasting the Fed would signal that additional policy easing might be needed to stave off an economic recession. Some analysts warned that in the near term, investors should be wary of a cloudy outlook in the Fed's post-meeting statement, which would leave the US central bank's options open as to how to react to the economic situation.
While the chances of a 0.50 rate cut by the Fed on Wednesday have largely evaporated in the last few weeks, the futures market still reflects expectations for about 40 basis points of policy easing by the end of January 2008. A sliver of doubt that the Fed would reduce its benchmark interest rate for the second meeting in a row entered the market after an article in The Wall Street Journal earlier on Tuesday made the case that policy easing this week is not a sure thing. However, expectations seemed to gel after a US consumer confidence index hit its lowest level in two years, causing the Dollar to cut its small gains on the day.
The EurUsd rose to a fresh record high of 1.4441 before settling at 1.4439. The Euro has risen around 10 cents since mid-August, when a crisis in the US sub-prime mortgage market began to spread to other areas of the economy. UsdChf fell to the lowest in 2-1/2 years, at 1.1575 down 0.57% yesterday. GbpUsd rose to a 26-year high of 2.0703 before backtracking to 2.0679, up 0.35% on the day.
The overall negative trend in the Dollar is intact heading into the Fed meeting, analysts said. Though commodity-related currencies have been the biggest gainers on the dollar this year, they took a breather on Tuesday as oil prices fell from record high. UsdCad was flat at 0.9536 after touching a 47-year low of 0.9514 yesterday.
Today's Key Issues (time in GMT):
BoJ left rate unchanged at 0.5%
10:00 EUR October Euro zone Consumer Confidence -5 vs -5
10:00 EUR October Euro zone Industrial Sentiment 2 vs 3
10:00 EUR September Euro zone Unemployment rate 6.9% vs 6.9%
10:00 EUR October Euro zone Business Climate Indicator 1.03 vs 1.09
10:00 EUR October Euro zone CPI estimate 2.3% vs 2.1% (YoY)
10:00 EUR October Euro zone Consumer Confidence -5 vs -5
10:00 EUR October Euro zone Services Confidence 18 vs 18
10:30 CHF October KOF Indicator 2.1 vs 2.14
10:30 GBP October GfK Consumer Confidence Survey -8 vs -7
11:00 USD October 26th MBA mortgage Applications
12:15 USD October ADP Employment Change 60k vs 58k
12:30 CAD August GDP 0.1 vs 0.2%
12:30 USD 3Q Core PCE prices advance 1.5% vs 1.4% (QoQ)
12:30 USD 3Q PCE price Index advance 1.5% vs 4.3%
12:30 USD 3Q GDP advance 3% vs 3.8%
12:30 USD 3Q GDP Price Index advance 2% vs 2.6%
12:30 USD 3Q Employment Cost Index 0.9% vs 0.9%
13:45 USD October Chicago Purchasing Manager Index 53 vs 54.2
14:00 NOK Central Bank Rate Decision 5% vs 5%
14:00 USD September Construction spending -0.5% vs 0.2%
18:15 USD Oct 31st FOMC Rate Decision Expected 4.5% vs 4.75%
The Risk Today:
EurUsd Outlook remains bullish. This put 1.4500 key level into focus. Next resistance holds 1.4530 March 1995 trend high. On the downside, a return below 1.4280 former resistance may threaten the trend and reopen the way down toward 1.4000 nearby support and 1.4125 trendline support. On a long term view, it would need a return below 1.3719 to confirm trend change. Initial support holds 1.4400 former resistance.
GbpUsd Cable remains positive and broke 2.0654 key resistance. A clear confirmation over that level would confirm a return of the bull trend paving the way for strength toward 2.1000 and a channel top at 2.1030.On the downside, it would need renewed pressure below 2.0200 and further weakness toward 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). Initial support holds 2.0500 former resistance.
UsdJpy Trend remains bearish. It has been consolidating within last week high and low 115.03 and 113.26. Further drop below 113.26 might push toward 112.61 and retest of ultimate 111.60 (August 17 low). On the upside, it still need a confirmation over 117.63 resistance to open the way for further extend toward 119.06 (61.8% retracement of 123.67 to 111.60 decline). Key support holds 114.
UsdChf dropped down to 1.1565 new low this morning. Initial resistance holds 1.1790 (23.6% retracement of 1.2477 to 1.1577 decline) and strong resistance 1.1923 (38.2%). However, recent downtrend development below 1.1680 former key level reopened the way toward 1.1500 psychological support and possibly 1.1484 (2005 March 14 low).
Resistance and Support:
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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- POTENTIAL PRICE RISK: HIGH Tue-- 08:30 GMT GB- CPI top tier confirmation of Inflation.
- POTENTIAL PRICE RISK: Medium Tue-- 09:00 GMT DE- ZEW Survey second most important German monthly Survey.
- POTENTIAL PRICE RISK: Medium Tue-- 09:00 GMT EZ- final HICP revision to flash report. Revisions are usually minor.
- POTENTIAL PRICE RISK: Medium Tue-- 13:15 GMT US- Industrial Production. Top output indicator.
- POTENTIAL PRICE RISK: Medium Wed-- 12:30 GMT US- Housing Starts and Permits revision to flash report. Useful housing leading indicator.
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- POTENTIAL PRICE RISK: Medium Thu-- 01:30 GMT AU- Employment. Top economic indicator.
- POTENTIAL PRICE RISK: Medium Thu-- 02:00 GMT CN- GDP. Top economic indicator.
- POTENTIAL PRICE RISK: HIGH Thu-- 08:30 GMT GB- Retail Sales. Top consumption indicator.
- POTENTIAL PRICE RISK: Medium Thu-- 12:30 GMT US- Weekly Jobless. Employment Indicator.
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