The Dollar rose versus the Euro in thin trade on Friday as volatile equity markets and fears of a deepening global recession led investors to seek the US currency as a haven. Extreme risk aversion and repatriation flows have been supporting the US currency recently. Looking ahead to this week, markets are bracing for interest-rate decisions by several central banks, including the Bank of England, the European Central Bank, the Reserve Bank of Australia and the Reserve Bank of New Zealand. US automakers are due to report on Tuesday their November US sales, which are expected to have dropped by some 30% from a year earlier. US law makers are soon reviewing restructuring plans submitted by the US automakers and consider their request for a $25 billion rescue plan.
News and Events:
The Dollar rose versus the Euro in thin trade on Friday as volatile equity markets and fears of a deepening global recession led investors to seek the US currency as a haven. Extreme risk aversion and repatriation flows have been supporting the US currency recently. Selling pressure on the Euro also mounted, with the single currency also falling against the Yen and Sterling on growing expectations that slowing euro-zone inflation may lead policy makers to cut rates more aggressively this week from the current 3.25%. Some analysts and traders also mentioned sizable month-end Dollar buy-orders at the London currency fixing (1600 GMT) added support to the US currency.
Trading volumes were lower than usual as US markets reopened for only half a day after the Thanksgiving holiday. In thin trading, EurUsd was 1.48% down at 1.2701, after briefly trading as low as 1.2646. EurJpy dropped 1.38% to 121.36. UsdJpy was little changed at 95.37 or 0.19% lower. GbpUsd was unchanged at 1.5408. UsdChf rose 1.09% at 1.2137 having posted 1.2200 intraday high.
Looking ahead to this week, markets are bracing for interest-rate decisions by several central banks, including the Bank of England, the European Central Bank, the Reserve Bank of Australia and the Reserve Bank of New Zealand. Investors refrain to build new large positions ahead of these meeting buy Japanese currency looks set to hold its broad strength in case any central banks surprise with larger cuts than forecast, which would further erode the interest rate advantage of their currency against the low yielding Yen.
US automakers are due to report on Tuesday their November US sales, which are expected to have dropped by some 30% from a year earlier. US law makers are soon reviewing restructuring plans submitted by the US automakers and consider their request for a $25 billion rescue plan.
Today's Key Issues (time in GMT):
07:00 EUR October German Retail sales -1.6% vs -2.3% (mom)
07:00 EUR October German Retail sales -1.5% vs 1.2% (yoy)
08:15 EUR November Spain Manufacturing PMI 29.4 vs 34.6
08:30 CHF November PMI 35.2 vs 47
09:00 EUR November Euro-zone Markit Manufacturing PMI 35.6 vs 41.1
09:00 NOK October Credit indicator 11.9% vs 12%
09:00 NOK October Retail sales -0.9% vs -0.4%
09:30 GBP October BoE consumer Credit 0.5b vs 0.25b
09:30 GBP November Markit Manufacturing PMI 40 vs 41.5
09:30 GBP October Mortgage Approvals 32k vs 33k
09:30 GBP October Mortgage Lending £1.7b vs 2.17b
13:30 CAD September GDP 0.2% vs -0.3% (mom)
13:30 CAD Q3 GDP 1.1% vs 0.3% (yoy)
16:00 USD October Construction spending -1% vs -0.3%
16:00 USD November ISM Manufacturing PMI 37 vs 38.9
16:00 EUR European Finance ministers meet, Brussels
18:45 USD Fed’s Bernanke and Fisher speak on the economic outlook
20:00 USD Treasury’s Paulson speaks on the economy and financial markets
The Risk Today:
EurUsd: Market is still trading in the last 3-week trading range 1.2330 – 1.3298 but breaking up the triangle consolidation pattern. This may open the way to 1.3500 target equal to 1.3302-1.2334 spread. On the further upside, only a return over 1.4000 (former trendline support) and 1.5000 will release actual pressure and may put key resistance 1.6000 into focus. Resistance holds 1.4002 former trendline support. Initial resistance holds 1.3298 end October high. On the downside, weakness below 1.2690 may open the way down to trendline support 1.2208. Next long-term support holds 1.1640 November 2005 low. Further support holds 1.0739 September 2003 low.
GbpUsd: Market dropped as low as 1.4558 on November 13th in current 3-month downtrend dropping from late October 1.6673 high. Strong supports hold 1.4560 trendline and 1.3682 March 2001 low. On the upside, strong resistance holds 1.6673 30th October high ahead of 1.7080 (38.2% retracement of 2.1161 – 1.4558). Further resistance holds 1.7860 (50% retracement). Tuesday volatile market hit 1.5534 high and actual initial resistance.
UsdJpy: Market might break down November triangle pattern. Further pressure in the current 3-months downtrend might open the way down to 93.56 20th November low and then 79.70 April 1995 low. Also, strong support holds 90.91 24th October low. On the upside, strong resistance holds 100 pivot point, but only a recovery over 103 upper trendline and 105 pivot point will put focus again on 108 and 110.67 15th August high. Initial resistance holds 97.43 last week high.
UsdChf: Market hit 1.2298 high on 21st November. Further strength may look for 1.2463 strong resistance ahead of 1.2506 (61.8% retracement of 1.4278 – 0.9639 decline). On the downside, renewed weakness below 1.1605 initial support and 1.1203 30th October low would undermine the current uptrend and reverse through 1.0692 22nd September low and 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.
Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland
Friday trading was thin in global risk aversion ahead of Central banks meetings.
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