The Dollar traded near Thursday one-month low against the Euro last Friday on speculation US reports tomorrow will show a slump in home prices accelerated and consumers were the most pessimistic in at least 15 years. Last week, the US currency fell versus the Canadian Dollar and held near a 25-year low against the Australian Dollar after Oil and Gold prices gained. European currencies and the Australian dollar are likely to benefit more from the rise in oil to a record high, according to analysts. European currencies and the Aussie may also gain as their central banks are less tolerant of inflation and they export more to oil producers and emerging markets, analysts said. The Euro may also be supported by speculation European Union is strong enough to withstand a slowdown in the US, allowing the European Central Bank to keep interest rates on hold to fight inflation. This week’s data, the Consumer Confidence surveys (Conference Board on Tuesday and University of Michigan on Friday) are likely to show that consumers are still unbelievably gloomy. Any sign of a rebound would be an indication that the arriving tax rebates are lifting spirits even as the gasoline price keeps rising into records.
News and Events:
The Dollar traded near Thursday one-month low against the Euro last Friday on speculation US reports tomorrow will show a slump in home prices accelerated and consumers were the most pessimistic in at least 15 years.
Last week, the US currency fell versus the Canadian Dollar and held near a 25-year low against the Australian Dollar after Oil and Gold prices gained. Traders reduced bets the Federal Reserve will raise interest rates this year after 325bp consecutive reductions to 2% since September, while the European Central Bank keeps rates unchanged at 4%. Futures contracts are showing a 42% (vs 31% the previous day) chance that the Fed will hold its target lending rate at 2% percent this year. The odds for a 25bp increase fell to 39% from 42%.
European currencies and the Australian dollar are likely to benefit more from the rise in oil to a record high, according to analysts. European currencies and the Aussie may also gain as their central banks are less tolerant of inflation and they export more to oil producers and emerging markets, analysts said. The Euro may also be supported by speculation European Union is strong enough to withstand a slowdown in the US, allowing the European Central Bank to keep interest rates on hold to fight inflation. Analysts expect the ECB to hold rates at 4% this year.
This week’s data, the Consumer Confidence surveys (Conference Board on Tuesday and University of Michigan on Friday) are likely to show that consumers are still unbelievably gloomy. Any sign of a rebound would be an indication that the arriving tax rebates are lifting spirits even as the gasoline price keeps rising into records.
On Friday, EurUsd was up 0.18% at 1.5761 near one-month high 1.5814. UsdJpy dropped 0.63% to 103.38. UsdChf was also down 0.6% at 1.0243. GbpUsd was unchanged at 1.9797.
Today's Key Issues (time in GMT):
00:00 GBP Bank Holiday – Markets closed
00:00 USD Memorial Day Holiday- Markets closed
The Risk Today:
EurUsd: Euro confirmed new uptrend last week. Market could now return up to 1.6000 Pivot point resistance ahead of key resistance 1.6200 market target. On downside, only a return below previous week 1.5400 - 1.5600 trading range would open the way to 1.5000 psychological key level before 1.4500 pivot point. Support holds 1.5693 Thursday low. Initial support holds 1.5697 Friday low.
GbpUsd: Cable broke up the upper Trendline resistance of one-month downtrend 2.0398 – 1.9364 last Thursday. This move over 1.9720 may reopen the way up to 1.9800 and 2.0000 psychological level. Actual trading range is 1.9600 – 1.9800. On the downside, a reversal below 1.9600 might bring again focus on 1.9337 January low and 1.9105 (50% retracement of 1.7049 – 2.1162 advance). Strong support holds 1.9363 20th February and 14th May low.
UsdJpy: Recent 1 ˝-month uptrend found resistance around 105. Market broke on Tuesday the lower Trendline support. This recent profit taking on 105 might send the market back down to 100 – 104 consolidation trading range. Minor support holds 102.58 May 9th low. Renewed strength over 105 would put 110.10 strong resistance (Trendline) into focus and mid January double top ahead of 111.92 early January high.
UsdChf: Market hit 1.0625 two-month high on May 8th. Last week, it broke down 1.0400-1.0600 trading range. This move would open the way down to 1.0200 and maybe toward 0.9639 17th March low. Early January double top 1.1191 marks strong resistance. Initial resistance holds 1.0625 May 8th high. Initial support holds 1.0216 Friday low.
Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland
Dollar trades near one-month low as Oil and Gold prices gained
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