The Dollar reversed on Monday on its worst day against the Euro in 3-weeks on Monday. The Yen weakened broadly against majors as credit conditions eased after major central banks released measures to rescue a distressed global financial system. The euro and sterling were also rising after UK, France and Germany governments announced plans to recapitalize their banking systems. All recent news improved the return in risk appetite on Monday’s after the Federal Reserve, the European Central Bank, Bank of England, and Swiss National Bank said they would provide commercial banks with as much Dollar liquidity as they needed at fixed rates to help money markets. Yen has been a major beneficiary of increased risk aversion in the last few months amid troubles in the global financial sector.
[B]News and Events:
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The Dollar reversed on Monday on its worst day against the Euro in 3-weeks on Monday. The Yen weakened broadly against majors as credit conditions eased after major central banks released measures to rescue a distressed global financial system. The euro and sterling were also rising after UK, France and Germany governments announced plans to recapitalize their banking systems.
All recent news improved the return in risk appetite on Monday’s after the Federal Reserve, the European Central Bank, Bank of England, and Swiss National Bank said they would provide commercial banks with as much Dollar liquidity as they needed at fixed rates to help money markets. Britain said it would pour $64bio into three of its biggest banks as part of a plan to restore confidence, helping a recovery in the Sterling. France and Germany also unveiled plans to recapitalize their banks.
Australia also said it would guarantee deposits in its banks. Yen has been a major beneficiary of increased risk aversion in the last few months amid troubles in the global financial sector. Investors have unwound billions of dollars in risky carry trades financed using the Yen’s ultra-low rates, bolstering the Japanese currency.
Yesterday, EurUsd rose 1.74% to 1.3643, its best day since Sept. 22nd. UsdJpy rose 1.85% to 102.53 rebounding from earlier 99.56 low. EurJpy climbed 3.61% to 139.88. GbpUsd rose 2.36% to 1.7445 from a five-year 1.6786 low on Friday. UsdChf was mixed -0.3% at 1.1352. AudUsd rose 9.68% to 0.7067, still down 28.69% for the last 2 quarters. AudJpy jumped 11.72% higher at 72.35. Volumes were lighter as Tokyo and Canadian and the New York bond markets were closed for national holidays.
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Today’s Key Issues (time in GMT):[/B]
06:45 EUR September French CPI final 0% vs -0.1% (mom)
06:45 EUR September French CPI final 3.4% vs 3.5% (yoy)
07:30 EUR September Spain CPI 0% vs -0.2% (mom)
07:30 EUR September Spain CPI 4.6% vs 4.9% (yoy)
08:00 EUR September Italy Consumer Prices final -0.3% vs 0.1% (mom)
08:00 EUR September Italy Consumer Prices final 3.8% vs 4.1% (yoy)
08:30 GBP September CPI 0.4% vs 0.6% (mom)
08:30 GBP September CPI 5% vs 4.7% (yoy)
08:30 GBP September RPI 0.5% vs 0.3% (mom)
08:30 GBP September RPI 4.9% vs 4.8% (yoy)
09:00 EUR October ZEW current conditions -15 vs -1
09:00 EUR October ZEW economic sentiment -51.1 vs -41.1
09:00 EUR August Euro-zone Industrial production 1.1% vs -0.3% (mom)
09:00 EUR August Euro-zone Industrial production -1.6% vs -1.7% (yoy)
16:00 EUR France�s Jouyet speaks to EU Parliament
16:00 USD Treasury�s Kimmitt speaks about economy
17:15 EUR ECB�s Trichet speaking in New York
18:00 USD September Federal budget $70b vs $112.6b
21:00 USD weekly ABC Consumer confidence -44 vs -43
23:50 JPY August Current account NSA -42.3% vs -17.3%
[B]The Risk Today: [/B]
[B]EurUsd:[/B] Last week strong pressure hit strong support 1.3666 December 2004 high and broke below 1.3500. Market strongly rebounded today on 1.3666 former support and now initial resistance. On the upside, only a return over 1.4000 and 1.5000 will release actual pressure and may put key initial resistance 1.6000 into focus. Still a break up there would open the way to Trendline resistance 1.6200. Initial resistance holds 1.4002 former trendline support. On the downside, renewed weakness will focus on 1.3056 support (retracement of 0.8231 � 1.6039 advance). Initial support holds 1.3259 Friday low.
[B]GbpUsd:[/B] Last week market dropped as low as 1.6786 strong support. It recovered yesterday over 1.7422 former support. On the upside, strong support holds 1.7697 last week high ahead of 1.8304 former support. But renewed downtrend may look for 1.6568 November 2003 low and 61.8% retracement of 1.3682�2.1161 advances). Following supports are 1.4560 trendline and 1.3682 March 2001 low.
[B]UsdJpy:[/B] Downtrend started in September is still running and hit 97.91 low Friday. Market rebounded yesterday up to 102.58 high. On the further upside, recovery over 105 pivot point will put focus again on 108 and 110.67 15th August high. Initial resistance holds 102.58 yesterday high. On the downside, renewed pressure may open the way to 95.75 17th March low. Current weak trend will stand below 103 upper trendline resistance.
[B]UsdChf:[/B] Market posted 1.1489 high last week. Further advance may open the way to 1.1596 December high and strong resistance. Initial support holds 1.1129 Friday low. On the downside, only weakness below 1.0692, 22nd September low, would give direction or open the way down to 1.0500 and 1.0375. Such a move may look for 1.0013 15th July low in front of 0.9637 17th March low.
[B]Resistance and Support:
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By[B] Jean-Claude Braha [/B]- ACM Advanced Currency Markets, Geneva, Switzerland