The Dollar edged up to a one-week high versus a basket of major currencies on Monday, on speculation that comments from G8 officials could push Oil prices further away from last week’s record highs. The Greenback also continued to benefit from a neutral European Central Bank tone, which reduced expectations of further rate hikes after last Thursday’s move to 4.25%. Oil hit 145.85 high on Thursday ahead of G8 meeting in Japan. Crude prices show a close negative correlation with the Dollar because the United States is a heavy energy. Investors have started to take the view that risks to growth and concern about the financial sector will prevent the Fed from raising the fed funds rate from 2% for now.
News and Events:
The Dollar edged up to a one-week high versus a basket of major currencies on Monday, on speculation that comments from G8 officials could push Oil prices further away from last week’s record highs. The Greenback also continued to benefit from a neutral European Central Bank tone, which reduced expectations of further rate hikes after last Thursday’s move to 4.25%, and from a US jobs release that was not as weak as some had expected.
Oil hit 145.85 high on Thursday ahead of G8 meeting in Japan. Crude prices show a close negative correlation with the Dollar because the United States is a heavy energy.
On Friday (US holiday), EurUsd was up 0.13% to 1.5707. UsdJpy was fairly unchanged at 106.81 +0.09%. UsdChf went 0.13% lower at 1.0255. GbpUsd was unchanged at 1.9826 in light trading.
Several Fed officials are slated to speak this week, starting with San Francisco Fed President Janet Yellen later on Monday. Fed Chairman Ben Bernanke will speak at a Federal Deposit Insurance Corp forum on Tuesday and before the House Financial Services committee on Thursday, although he is expected to confine his comments to financial market regulation.
Investors have started to take the view that risks to growth and concern about the financial sector will prevent the Fed from raising the fed funds rate from 2% for now. However, markets are still pricing in a 25bp rise before the end of the year.
Today’s Key Issues (time in GMT):
00:00 USD G8 world leaders� summit in Hokkaido, Japan
08:30 EUR July Euro-zone Sentix Index 2.5 vs 5.2
08:30 GBP May Industrial output -0.1% vs 0.2% (MoM)
08:30 GBP May Industrial output -0.8% vs 0.2% (YoY)
08:30 GBP May Manufacturing output -0.1% vs 0.1% (MoM)
08:30 GBP May Manufacturing output -0.2% vs 0.1% (YoY)
10:00 EUR May Germany Industrial output 0.4% vs -0.8% (MoM)
12:30 CAD May Building permits -6% vs 14.5%
14:30 CAD Bank of Canada Business Outlook Survey
15:00 USD Fed�s Yellen speaks on the economic outlook, San Diego
The Risk Today:
EurUsd: Market hit 1.5910 high last week but return in consolidation 1.5400-1.5800 range. Initial resistance holds 1.5844 June 9th high. A break up there would reopen the way up to 1.6000 Pivot point resistance ahead of key resistance 1.6200 market target. On the downtrend, weakness below 1.5400 will put the current light 2-month uptrend on hold. This may open way down to 1.5000 key level. Support holds 1.5304 13th June low.
GbpUsd: Cable hit 2.0000 psychological level last week. It did reversed gains ahead of US long weekend down to 1.9826 on Friday. On the upside, psychological 2.0000 level stays into focus. On the downside, a reversal below 1.9600 might bring again focus on 1.9337 January low and 1.9105 (50% retracement of 1.7049 � 2.1162 advance). Strong support holds 1.9363 20th February and 14th May low.
UsdJpy: Market broke last week lower 3-month trendline down to 104.99 low. Current 3-month uptrend failed to overtop 108.59 16th June high. More profit taking would bring the market lower than 105 and maybe back to 100 � 104 consolidation trading range. Initial support hold 106.60 Friday low. Renewed advance to mid-June 108.59 would put 110.10 strong resistance (Trendline) into focus and mid January double top ahead of 111.92 early January high.
UsdChf: Market hit 1.0112 low last week buy Dollar recovered ahead of 4th July holiday. Strong support holds 1.0148 June 9th low. Further support holds 1.0112 Thursday low. Further weakness may open the way toward 0.9637 17th March low. June 13th 1.0541 high holds initial resistance. A return over 1.0200 would bring back consolidation 1.0200 � 1.0600 range.
Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland