The Dollar rose on Tuesday, boosted by a sharp drop in oil prices and persistent concerns about the health of other major global economies. The theme driving global financial markets on Tuesday was Crude oil’s tumble to as low as 105.51 per barrel as Hurricane Gustav had limited impact on energy infrastructure. Sterling was under pressure after Britain’s finance minister said over the weekend that economic challenges were the greatest in 60 years. Adding to sterling’s weakness was a forecast by the OECD on Tuesday suggesting the UK would fall into a recession in late 2008. Australia’s central bank cut rates by a 25bp to 7% helping shove the Australian dollar down to its lowest in a year. Market will focus on ECB Jean-Claude Trichet news conference after Thursday’s policy meeting.
News and Events:
The Dollar rose on Tuesday, boosted by a sharp drop in oil prices and persistent concerns about the health of other major global economies. The theme driving global financial markets on Tuesday was Crude oil’s tumble to as low as 105.51 per barrel as Hurricane Gustav had limited impact on energy infrastructure. Oil last traded down 5.11% at 110.18 per barrel. Dollar also drew support from weakness in high-yielding currencies triggered by the Reserve Bank of Australia’s interest-rate cut.
Yesterday, EurUsd was down 0.64% at 1.4488 after falling as low as 1.4467. GbpUsd hit a 2-1/2-year low of 1.7782 before pulling back to 1.7800, down 0.6%. UsdJpy was up 0.41% at 108.47, above a one-month low of 107.62 done the previous day. UsdChf was up 0.55% to 1.1081 after hitting 1.1131 intraday high.
Sterling was under pressure after Britain’s finance minister said over the weekend that economic challenges were the greatest in 60 years. Adding to sterling’s weakness was a forecast by the OECD on Tuesday suggesting the UK would fall into a recession in late 2008.
Market will focus on ECB Jean-Claude Trichet news conference after Thursday’s policy meeting, at which the ECB is expected to leave interest rates unchanged at 4.25%. With oil prices falling sharply, investors will look for signs that Trichet’s anti-inflation stance is cooling.
On Tuesday, Australia’s central bank cut rates by a 25bp to 7% helping shove the Australian dollar down to its lowest in a year. AudUsd last traded down 2.06% at 0.8314.
Today’s Key Issues (time in GMT):
08:00 EUR August Euro-zone Markit Services PMI 48.2 vs 48.3
08:00 EUR August Euro-zone Markit Composite PMI 48 vs 47.8
08:30 GBP August CIPS/Markit Services PMI 47 vs 47.4
09:00 EUR Q2 Euro-zone GDP revised -0.2% vs 0.7% (qoq)
09:00 EUR Q2 Euro-zone GDP revised 1.5% vs 2.1% (yoy)
13:00 CAD Bank of Canada rate decision 3% vs 3%
14:00 USD July Durable Goods orders revised 1.3% vs 1.3%
14:00 USD July Factory orders 1% vs 1.7%
The Risk Today:
EurUsd: Market dropped as low as 1.4467 yesterday. Further weakness will put the focus on strong support 1.4366 22nd January low. On the upside, only a return over 1.5000 and 1.5500 will release actual pressure and put key initial resistance 1.6000 into focus. Still a break up there would open the way to Trendline resistance 1.6200.
GbpUsd: Cable dropped to 1.7782 low yesterday. Early week sharp move broke 1.7936 19th April high. Strong support holds 1.7251 3rd April low. On the upside, initial resistance holds 1.8795 last 2-weeks high. Former support 1.9363 holds also strong resistance. Key level holds 2.0100 resistance.
UsdJpy: Last 6-weeks recovery pushed the market up to 110.67 high 3-weeks ago. Further advance would open the way toward 111.92 early January high. On the downside, last week return below 108.59 and 108.14 supports placed market near the 6-month lower trendline support. Further pressure toward 107.50 level and may open the way toward 105 pivot, 102.73 support and 100 pivot point. Initial support holds 107.62 Monday low.
UsdChf: Market rose as high as 1.1131 yesterday and ended up 0.55% at 1.1081. Initial resistance holds 1.1107 13th February high. Strong resistance holds 1.1593 December 2007 high. On the downside, initial support holds 1.0863. Only renewed weakness below 1.0500 and 1.0375 would retest the 1.0000 pivot point and may open the way toward 0.9637 17th March low.
Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland