The Dollar rose against Euro on Wednesday on the view the European Central Bank might have to cut interest rates and optimism that US lawmakers were about to approve the $700bio plan to stabilize the US financial system. This revised version allows the Treasury to buy bad loans from banks to encourage fresh lending and boost economic growth. The Dollar also got a boost from a report showing US private employers cut a surprisingly low 8k jobs in September, according to ADP Employer Services. The ECB meets today to decide on interest rates and could still leave its benchmark rate steady at 4.25%. News that Britain’s manufacturing sector shrank at a record pace in September pressured Sterling. The report raised the chances of a Bank of England rate cut next week.
News and Events:
The Dollar rose against Euro on Wednesday on the view the European Central Bank might have to cut interest rates as doubts mount over the euro-zone’s ability to deal with the global financial crisis.
Yesterday all day optimism that US lawmakers were about to approve the $700bio plan to stabilize the US financial system mainly supported the Dollar. At least, the plan which was rejected on Monday has been accepted yesterday night by the US senate. This revised version allows the Treasury to buy bad loans from banks to encourage fresh lending and boost economic growth.
European governments scrambled this week to shore up banks through nationalizations and capital infusions as the financial contagion from the US subprime mortgage mess spread across the Atlantic. The ECB meets today to decide on interest rates and could still leave its benchmark rate steady at 4.25%.
EurUsd dropped beneath the key 1.4000 level, trading as low as 1.3976. It was down 0.91% at 1.3991. Euro has been also hurt by data showing euro zone manufacturing fell to a near seven-year low in September, while the unemployment rate rose to 7.5% in August from 7.4%. UsdJpy fell to a session low of 105.33 after data showed that US factory activity shrank in September to its lowest since the 2001 recession. It recovered ending up 0.06% at 105.33. UsdChf was up 0.74% to 1.1277.
The Dollar also got a boost from a report showing US private employers cut a surprisingly low 8k jobs in September, according to ADP Employer Services. News that Britain’s manufacturing sector shrank at a record pace in September pressured Sterling. GbpUsd was down 0.87% at 1.7676. The report raised the chances of a Bank of England rate cut next week.
Today’s Key Issues (time in GMT):
06:00 GBP September Nationwide House Price -1.7% vs -1.9% (mom)
06:00 GBP September Nationwide House Price -12.4% vs -10.5% (yoy)
07:30 DKK August Unemployment 1.6% vs 1.6%
08:00 NOK September Reg�d unemployment NSA 1.6% vs 1.8%
07:15 EUR September PMI Manufacturing 38.3 vs 42.4
09:00 EUR August Euro-zone Producer prices -0.5% vs 1.1%
09:00 EUR August Euro-zone Producer prices 8.5% vs 9%
11:45 EUR October ECB Rate decision 4.25% vs 4.25%
12:30 USD weekly Initial claims 475k vs 493k
14:00 USD August Durable goods revision 4.5% vs 4.5%
14:00 USD August Factory orders -2.5% vs 1.3%
The Risk Today:
EurUsd: This week weakness below 1.4250 did put the focus on 1.3882 11th September initial support and next strong support 1.3666 December 2004 high. A break lower will open the way to 1.3056 support (retracement of 0.8231 � 1.6039 advance). On the upside, only a return over 1.5000 and 1.5500 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 1.4867 22nd September high.
GbpUsd: Friday 25th September 1.8669 high marked the end of the mid-September uptrend. This week weakness below 1.8324 (23.6% retracement of 2.1161- 1.7447 decrease) may open the way to 1.7447 11th September low and may test 1.7422 (50% retracement of 1.3682 � 2.1161 advance). Strong support holds 1.7251 3rd April low. On the upside, initial resistance holds 1.8669 Friday high ahead of 1.8795 21st August high strong resistance holds.
UsdJpy: Early this week, Market return with strong volatility posting 103.50 to 107 trading range. Further advance will put 110.67 15th August high. Or renewed pressure below 103.50 initial support may open the way to 101.45 support (61.8% retracement of 95.75 � 110.67 advance), as 100 pivot point.
UsdChf: Market posted 1.1292 high yesterday, getting closer from 1.1418 11th September high. Further advance may open the way to 1.1596 December high. On the downside, only weakness below 1.0692, 22nd September low, would undermine the current trend and open the way down to 1.0500 and 1.0375. Such a move may also test the 1.0013 15th July low in front of 0.9637 17th March low. Initial resistance holds 1.1280 19th September high ahead of 1.1418 11th September trend high. Strong resistance holds 1.1593 December 2007 high.
Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland