The Dollar fell against the Euro and a basket of currencies on Monday as risk aversion eased after the US government agreed to inject $20 billion of new capital to rescue troubled Citigroup. While investors remain cautious due to concerns about a global recession, they welcomed the US government’s $300 billion-plus lifeline to prevent the collapse of the world’s largest banking group. British Finance Minister Alistair Darling unveiled a broad stimulus plan to boost the economy. Demand for US stocks rose, while the Dollar has been falling since late Friday after news leaked that Geithner, the president of the New York Federal Reserve Bank, would be named as Treasury secretary.
News and Events:
The Dollar fell against the Euro and a basket of currencies on Monday as risk aversion eased after the US government agreed to inject $20 billion of new capital to rescue troubled Citigroup. Stock markets jumped across the globe in a sign of higher risk appetite, which has been linked recently to Dollar weakness.
While investors remain cautious due to concerns about a global recession, they welcomed the US government’s $300 billion-plus lifeline to prevent the collapse of the world’s largest banking group.
US stocks initially trimmed gains as President-elect Barack Obama named Timothy Geithner as US Treasury secretary, as widely expected, and that also caused the Euro to trim gains against the Dollar. Stock investors were disappointed that Obama did not provide any specific Dollar figures or other new details about his stimulus plan. But investors then refocused back on the plan for Citigroup, which sent the Euro back to session highs.
Yesterday, EurUsd was up 2.74% at 1.2921, a two-week high. EurJpy rose 3.68% to 125.13. GbpUsd rallied 1.93% to 1.5155. UsdJpy rose 0.91% to 96.84. UsdChf dropped 2.09% at 1.1963 having hit 1.1923 low.
British Finance Minister Alistair Darling unveiled a broad stimulus plan to boost the economy. Demand for US stocks rose, while the Dollar has been falling since late Friday after news leaked that Geithner, the president of the New York Federal Reserve Bank, would be named as Treasury secretary. At a press conference in Chicago, Obama appointed Geithner as Treasury secretary and named former Treasury chief Lawrence Summers to head the National Economic Council.
On yesterday data release, a report showed sales of US existing homes fell 3.1% in October to a 4.98 million-unit annual rate. In Europe, a below-consensus reading for the German business climate index underlined weakness in the region’s largest economy, keeping expectations high for cuts in euro-zone interest rates.
Today’s Key Issues (time in GMT):
07:00 EUR December German GfK consumer sentiment 2.2 vs 1.9
07:45 EUR November French Business climate 80 vs 88
08:45 GBP Bank of England�s King, Gieve, Bean, Barker and Sentence testify at Treasury Committee Hearing
09:00 NOK Q3 GDP growth 0% vs 0.6%
09:00 NOK Q3 GDP growth mainland 0.1% vs 1%
13:30 USD Q3 Core PCE prices 2.9% vs 2.9%
13:30 USD Q3 Corporate Profits Adv -6% vs -5.4%
13:30 USD Q3 GDP deflator preliminary 4.2% vs 4.1%
13:30 USD Q3 GDP preliminary -0.5% vs -0.3%
13:30 USD Q3 GDP sales preliminary -1% vs -0.8%
13:30 USD Q3 PCE prices, preliminary 5.4% vs 5.4%
13:30 CAD September Retail sales ex-autos 0.2% vs -0.3% (mom)
13:30 CAD September Retail sales 0.3% vs -0.3% (mom)
15:00 USD November Consumer confidence 37.9 vs 38
The Risk Today:
EurUsd: Market is still trading in the last 3-week trading range 1.2330 � 1.3298 but breaking up the triangle consolidation pattern. This may open the way to 1.3500 target equal to 1.3302-1.2334 spread. On the further upside, only a return over 1.4000 (former trendline support) and 1.5000 will release actual pressure and may put key resistance 1.6000 into focus. Resistance holds 1.4002 former trendline support. Initial resistance holds 1.3298 end October high. On the downside, weakness below 1.2690 may open the way down to trendline support 1.2208. Next long-term support holds 1.1640 November 2005 low. Further support holds 1.0739 September 2003 low.
GbpUsd: Market dropped as low as 1.4558 on November 13th in current 3-month downtrend dropping from late October 1.6673 high. Strong supports hold 1.4560 trendline and 1.3682 March 2001 low. On the upside, strong resistance holds 1.6673 30th October high ahead of 1.7080 (38.2% retracement of 2.1161 � 1.4558). Further resistance holds 1.7860 (50% retracement). Last week volatile market hit 1.5250 high before reversing to 1.4704. Initial resistance hold 1.5265 October 24th low.
UsdJpy: Market has been holding slightly below 99.80 September-October trendline resistance in the latest weeks and even dropping to 93.56 low last week. Initial resistance holds 97.43 Monday high. On the upside, only a recovery over 103 upper trendline and 105 pivot point will put focus again on 108 and 110.67 15th August high. Meanwhile, strong resistance holds 100 pivot point. Further pressure in the current downtrend might open the way down to 94.80 13th November low and then 79.70 April 1995 low. Strong support holds 90.91 24th October low.
UsdChf: Market hit 1.2298 high on Friday. Further strength may look for 1.2463 strong resistance ahead of 1.2506 (61.8% retracement of 1.4278 � 0.9639 decline). On the downside, renewed weakness below 1.1605 initial support and 1.1203 30th October low would undermine the current uptrend and reverse through 1.0692 22nd September low and down to 1.0500 and 1.0375. Such a move may look for 1.0013 15th July low in front of 0.9637 17th March low.
Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland