The Dollar fell against a basket of currencies on Monday, breaking a three-day rally, as buyers retreated to the sidelines ahead of key economic data and awaiting the Federal Open Market Committee (FOMC) statement and rate decision. The policy-setting FOMC is widely expected to cut the benchmark overnight lending rate by only 25bp to 2%. ECB President Jean-Claude Trichet and Governing Council member Yves Mersch both said risks to price stability remained on the upside, with Trichet adding that there were no grounds for complacency. Their comments suggested the ECB is not ready to start cutting interest rates from 4% soon, even with regional data pointing to an inflation slowdown in four German states for April.
News and Events:
The Dollar fell against a basket of currencies on Monday, breaking a three-day rally, as buyers retreated to the sidelines ahead of key economic data and the Federal Reserve’s policy meeting this week. Analysts said the Dollar would likely stay confined to current trading ranges, awaiting a push from either the Federal Open Market Committee (FOMC) statement accompanying its interest rate verdict or first-quarter growth numbers, both due on Wednesday. The policy-setting FOMC is widely expected to cut the benchmark overnight lending rate by only 25bp to 2% at the end of a two-day meeting, and signal that its interest rate-cutting campaign is over for now. Growing speculation that the Fed might stop cutting interest rates and a rise in U.S. stocks on takeover deals earlier lifted the Dollar and global sentiment improved last week amid stronger-than-expected US corporate earnings and a growing view that the worst of the credit crisis has passed.
EurUsd climbed 0.24% to 1.5656, snapping a three-day decline. But it was still about 3cts below last week’s record high of 1.6019. UsdJpy dropped 0.53% to 104.11 after touching 104.82 intraday high. UsdChf was lower by 0.25% at 1.0337. GbpUsd rose 0.39% at 1.9913 after posting 1.9781 � 1.9965 extreme low and high.
Comments from European Central Bank�s officials repeating their warnings about persistent inflation lent the Euro mild support. ECB President Jean-Claude Trichet and Governing Council member Yves Mersch both said risks to price stability remained on the upside, with Trichet adding that there were no grounds for complacency. Their comments suggested the ECB is not ready to start cutting interest rates from 4% soon, even with regional data pointing to an inflation slowdown in four German states for April. A surprise jump in a gauge of German consumer sentiment also helped the Euro, as it indicated that the euro zone’s biggest economy may be in better shape than indicated by last week’s weak Ifo business confidence survey.
Today’s Key Issues (time in GMT):
00:00 JPY Japan Market Holiday
07:15 SEK April Consumer Confidence 2.3 vs 2.5 (MoM)
07:30 SEK March Retail sales 0.4% vs 1.7% (MoM)
07:30 SEK March Retail sales 3.6% vs 4.6% (YoY)
08:30 GBP March BoE consumer Credit �1.2B vs �2.35B
08:30 GBP March Mortgage approvals 65k vs 73k
08:30 GBP March Mortgage Lending $7.2B vs �7.45B
10:00 GBP April CBI distributive trades -3 vs 1
14:00 USD April Consumer confidence 62 vs 64.5
21:00 USD ABC/Wash Post Index -40 vs -40
21:01 GBP April GfK Consumer confidence Survey -20 vs -19
21:30 JPY March Jobless Rate 3.9% vs 3.9%
21:30 JPY March Household Spending 0.5% vs 0% (YoY)
21:30 JPY March Industrial Production -0.8% vs 1.6% (MoM)
00:00 JPY Bank of Japan Monetary Policy Meeting
00:00 JPY Bank of Japan Target Rate 0.5% vs 0.5%
The Risk Today:
EurUsd: Last week, Euro made its largest drop in the last 5-week, after hitting 1.6019 all time high. Medium term trading range is still set between 1.5500 � 1.5800. Strong support hold 1.5528 (23.6% retracement of 1.4311-1.5904 advance). Psychological 1.5000 level marks strong key support before 1.4500 pivot point. Pivot point hold 1.6000 resistance ahead of key resistance 1.6200 market target. Initial support hold 1.5511 April 3rd low.
GbpUsd: Cable is consolidating around 1.9800. Further strength may open the way toward 2.0000 psychological level. Confirmation over 2.0100 major pivot point would set Cable free for more uptrend. Actual trading range is 1.9600 � 2.0000. Renewed pressure below 1.9800 may open the way down to 1.9337 January low and 1.9105 (50% retracement of 1.7049 � 2.1162 advance).
UsdJpy: Uptrend started mid-March is loosing strength. But further advance may open the way up to 105, then 110.10 strong (Trendline) resistance and mid January double top ahead of 111.92 early January high. Fail to overtop 105 will bring back weakness on 100 � 103 consolidation trading range. Minor support holds 102.95 early April high.
UsdChf: Market broke up 1.0200 last week and further Dollar advance may bring market up to 1.0457 trendline resistance. A return below 1.0200 may reopen the way down 1.0000 and toward 0.9639 17th March low. Current uptrend looks set up over 1.0200 former resistance. Early January double top 1.1191 marks strong resistance.
Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland