Dollar dropped to record low after weak US GDP

The Dollar dropped to a record low against the Euro on Friday after the weakest reading of US economic growth in 4 years suggested the economy could be at danger of falling behind the rest of the world.
US GDP growth slowed to only 1.3% annualized in Q1, from 2.5% in the final quarter of last year. Consensus was 1.8%.
For the first time singe its launch in January 1999, the Euro rose at 1.3681 high. At Friday close, EurUsd rose to 0.46% at 1.3656. Many analysts and money managers said the falling Dollar is part of a long-term trend that is not about to end. EurJpy also rose to a record high of 163.33 in the wake of the Bank of Japan’s decision to keep interest rates on hold at 0.5% and to cut their outlook on inflation.

News and Events:
The Dollar dropped to a record low against the Euro on Friday after the weakest reading of US economic growth in 4 years suggested the economy could be at danger of falling behind the rest of the world.
US GDP growth slowed to only 1.3% annualized in Q1, from 2.5% in the final quarter of last year. Consensus was 1.8%. Consumption increased by 3.8%. Fast rising energy prices and falling consumer confidence suggest that consumption growth will slow in Q2. The biggest negative contribution from growth came from residential investment, which contracted by 17% and wiped 1% off GDP. Overall, this report will reignite talk of Fed rate cuts. If Q2 does prove to be even weaker, then the Fed would start to cut.
For the first time singe its launch in January 1999, the Euro rose at 1.3681 high. At Friday close, EurUsd rose to 0.46% at 1.3656. Many analysts and money managers said the falling Dollar is part of a long-term trend that is not about to end. EurJpy also rose to a record high of 163.33 in the wake of the Bank of Japan’s decision to keep interest rates on hold at 0.5% and to cut their outlook on inflation.
UsdJpy was largely unchanged at 119.51 after hitting 119.77 intraday high. Sterling rose 0.37% against the Dollar at 1.9981 after hitting intraday 2.0044 high and 1.9866 low in volatile market. GbpUsd jumped to a 26-year high of 2.0133 two weeks ago.

Today’s Key Issues (time in GMT):

8.00 Euro March Euro-zone M3 9.7% vs 10% (YoY) and 9.8% vs 9.9% 3 months Avg.

08.30 GB March BBA Mortgage Approvals 77k vs 54.7k

09.00 Euro April Euro-zone Consumer Confidence -3 vs -4
09.00 Euro April Euro-zone Industrial Confidence 7 vs 6
09.00 Euro April Euro-zone Economic Confidence 111.7 vs 111.2
09.00 Euro April Euro-zone Services Confidence 23 vs 22
09.00 Euro April Euro-zone CPI estimate 1.8% vs 1.9% (YoY)

09.30 GB April GfK Consumer Confidence Survey -8 unchanged

12.30 US March Personal Income 0.5% vs 0.6%
12.30 US March Personal Spending 0.5% vs 0.6%
12.30 US March Personal Consumption Expenditures Core 2.2% vs 2.4% (YoY)

12.30 CAD February GDP 0.2% vs 0.1% (MoM)

13.45 US April Chicago Purchasing Managers Index 54 vs 61.7

The Risk Today:

EurUsd cleared the 1.3666 December 2004 former all-time high and reached a new peak at 1.3681 on Friday. As long as last Monday’s low at 1.3540 continues to hold, odds will favor another leg higher. There’s little resistance above 1.3670 till 1.3750, where the rise from the January 1.2865 low would equal the distance made in the October-December (1.2483-1.3368) rise. Initial support comes in at 1.3584.

GbpUsd is holding above the 1.9824 April 3 breakout high. Last Friday 1.9866 low marks support of the bull trend. A return above congestion from 2.0064 to 2.0071 would clear the way for a run at 2.0133, April 18 trend high. Potentially, the next barrier is 2.0230. There, the rise from 1.9591 would equal the distance made in the 1.9184-1.9823 preceding rise. On the downside, a move below 1.9850 support would damage the underlying short-term bull.

UsdJpy breakout from consolidation has the 119.90 Mid-April high in its sights. There’s little resistance above there till the Fibonacci 120.54 area (76.4% retracement of the 122.20-115.15 decline). Solid support is at last Monday’s 118.23 low.

UsdChf remains bearish - the subsequent recovery from 1.1996 is holding below last Monday’s 1.2128 high and only a move above there would put the underlying bear trend on hold. Focus remains on Key support from early December at 1.1881.

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Resistance and Support:

By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland