The Dollar climbed to a seven-week peak against the Yen and moved further away from a record low versus the Euro on Friday after Citigroup’s results sparked hope that the worst of the credit crisis has passed. Citigroup, the largest US bank, posted a quarterly loss of $5.1bio and pretax write-downs of $6bio. Shares in the company rose as investors were appeased by efforts being made to get past its credit problems and drive down costs. Despite the Dollar’s gains, analysts cautioned that although US bank earnings this quarter have not been as good as some had expected, there are still indications the credit crisis is far from over. European Central Bank Governing Council member Klaus Liebscher said no room exists to cut euro zone interest rates, adding that he is not ruling out tightening in the region. European interest rates would stay put at 4% until later this year. The Federal Reserve, on the other hand, is seen cutting rates further from the current 2.25%.
News and Events:
The Dollar climbed to a seven-week peak against the Yen and moved further away from a record low versus the Euro on Friday after Citigroup’s results sparked hope that the worst of the credit crisis has passed. Lately, troubles at US financial firms have been triggered by weakness in the housing market, but Citigroup’s earnings have tempered worries about the sector and boosted risk appetite, supporting Dollar. Citigroup, the largest US bank, posted a quarterly loss of $5.1bio and pretax write-downs of $6bio. Shares in the company rose as investors were appeased by efforts being made to get past its credit problems and drive down costs.
On Friday, EurUsd fell 0.57% on Friday at 1.5815 after posting intraday low 1.5712, its steepest decline in nearly three weeks, well away from a record peak of 1.5983 hit earlier in the week and posting. UsdJpy rose 1.27% to 103.68, after reaching its strongest since late February at 104.65. UsdChf rose to a five-week high at 1.0285 and last traded at 1.0183, up 1.26%, posting its largest daily increase since April 1. GbpUsd rose 0.35% to 1.9977.
Despite the Dollar’s gains, analysts cautioned that although US bank earnings this quarter have not been as good as some had expected, there are still indications the credit crisis is far from over. The Euro got a brief boost on remarks by European Central Bank Governing Council member Klaus Liebscher. He said no room exists to cut euro zone interest rates, adding that he is not ruling out tightening in the region. The euro has jumped 8.4% to the Dollar this year on the view European interest rates will stay put at 4% until later this year. The Federal Reserve, on the other hand, is seen cutting rates further from the current 2.25%. More US cuts would help keep euro zone rates significantly above those in the United States, keeping the Euro’s yield appeal intact.
Analysts said the market was taking a breather ahead of 1.6000 and market participants said Euro selling would likely be short-lived, as ongoing inflation pressures will prompt the ECB to hold rates at 4% at least through Q3.
Today’s Key Issues (time in GMT):
07:15 CHF March Producer Import Price 0.3% vs 0.2% (MoM)
07:15 CHF March Producer Import Price 3.5% vs 3.6% (YoY)
12:30 USD March National Activity Index previous -1.04
12:30 Securities Canadians CAD$ -0.13B previous
12:30 Securities Foreign CAD$ 0.92B previous
The Risk Today:
EurUsd: Euro posted a new all time high at 1.5983 last week. Medium term trading range is set between 1.5800 � 1.6000. 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. Initial resistance hold 1.6000 key level ahead of 1.6200 market target. Initial support hold 1.5511 April 3rd low. Minor resistance holds 1.5957 Friday high.
GbpUsd: Cable recovered over 1.9800 last week ending a one month downtrend. 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 1.9800 � 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: Last week, Dollar strength push up UsdJpy over 102 and 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 in 100 � 103 consolidation trading range. Minor support holds 102.95 early April high.
UsdChf: Market still remains weak below 1.0200. It is currently looking for direction with an ongoing triangle chart figure. Below 1.0000; strong support holds 0.9639 17th March low. Over 1.0000: uptrend would only return with a confirmation over 1.0200 resistances. Early January double top 1.1191 marks strong resistance.
Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland