Dollar hits 13-year low against Yen, but recovered on White house automakers support

The Dollar fell against the Yen on Friday, but recovered from a 13-year low after the White House said it would consider steps to stave off a collapse of the ailing US auto sector. UsdJpy plunged to 88.38, its lowest since mid-1995, after the US Senate rejected a $14 billion auto rescue plan. It rebounded to 91.25, still down 0.31% on Friday, after the White House said it may use money from a $700 billion rescue package for banks for an emergency loan to US automakers. The Dollar still ended the week deeply lower, suffering its biggest weekly decline against a basket of major currencies since 1995. Analysts said traders have been taking profits after months of steady gains and speculated that some of the repatriation flows that have lifted the greenback have started to dry up. Three European banks announced on Sunday a total of $3.8 billion exposure in Madoff�s fund, who was arrested in New York on Thursday in a $50 billion alleged fraud.

News and Events:

The Dollar fell against the Yen on Friday, but recovered from a 13-year low after the White House said it would consider steps to stave off a collapse of the ailing US auto sector. UsdJpy plunged to 88.38, its lowest since mid-1995, after the US Senate rejected a $14 billion auto rescue plan. That heightened recession fears, pushing investors to buy the Yen to cover trades that were financed by borrowing the currency at low rates. It rebounded to 91.25, still down 0.31% on Friday, after the White House said it may use money from a $700 billion rescue package for banks for an emergency loan to US automakers.

The Dollar still ended the week deeply lower, suffering its biggest weekly decline against a basket of major currencies since 1995. Analysts said traders have been taking profits after months of steady gains and speculated that some of the repatriation flows that have lifted the greenback have started to dry up.

On Friday, EurUsd was up 0.17% to 1.3350. GbpUsd lost 0.53% to 1.4947. UsdJpy was 0.31% lower at 91.25 rebounding from 88.38 intraday low. UsdChf dropped 0.55% to 1.1793.

Another reason for the Dollar’s rebound against the Yen on Friday, analysts said, was fear Japan would intervene to weaken the currency. A strong Yen makes Japanese exports more expensive in overseas markets. Japan has a long history of trying to stem Yen strength through market intervention, although it has stayed on the sidelines since 2004.

Three European banks announced on Sunday a total of $3.8 billion exposure in Madoff�s fund, who was arrested in New York on Thursday in a $50 billion alleged fraud. Santander put its client exposure at over �2.33 billion. BNP Paribas said it could face a potential loss of �350 million from exposure to Madoff-linked investments. And Swiss bank Reichmuth & Co said it had about Chf 385 million Swiss francs at stake. The announcements are likely to be followed by others across Europe. Geneva based private banks and asset managers could lose more than chf 5 billion.

Today’s Key Issues (time in GMT):

08:45 CHF November Producer/Import price -1.4% vs -0.6% (mom)
08:45 CHF November Producer/Import price -1.1% vs 2.9% (yoy)
13:30 USD December NY Fed manufacturing -27.5 vs -25.43
14:00 USD October Net L-T flows exswaps $40b vs $66.2b
14:15 USD November Capacity utilization 75.7% vs 76.4%
14:15 USD November Industrial output -0.8% vs 1.3%
17:30 EUR ECB’s Trichet speaks at journalists’club Frankfurt
18:00 USD December NAHB housing market index 9 vs 9

The Risk Today:

EurUsd: Market broke on the upside the November triangle consolidation pattern. It�s been trading as high as 1.3415 on Friday erasing the last 6-week trading range 1.2330 � 1.3298. 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 confirm release of the 3-month pressure and may put key resistance 1.6000 into focus. Resistance holds 1.4002 former trendline support. Initial resistance holds 1.3406 yesterday high. On the downside, renewed weakness below 1.2430 21st November low 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. Former resistance 1.3298 holds now initial support.

GbpUsd: Market dropped as low as 1.4471 on 4th December in current 5-month downtrend dropping from Mid-July 2.0158 high. Strong supports hold 1.3682 March 2001 low. On the upside, initial resistance holds 1.5458 (23.6% retracement of 1.8669-1.4471 decline) ahead of strong resistance holds 1.6673 30th October high. Major pivot point is 1.6570 (50% retracement of 1.8669�1.4471 decline). Further resistance holds 1.7816 (50% retracement of 2.1161-1.4471 decline). Trading range is set between Tuesday 25th 1.5534 high and 1.4471 December low, respectively initial resistance and support.

UsdJpy: UsdJpy was heavily under pressure Friday hitting 88.35 low before recovering to 91.25, still down 0.31%… Strong support still holds 90.91 24th October low. Further downtrend may open 79.70 April 1995 low. On the upside, strong resistance holds 100 pivot point, but only a recovery over 103 upper trendline and 105 pivot point will put focus again on 108 and 110.67 15th August high. Initial resistance holds 93.91 ahead of 97.43 24th November high.

UsdChf: Market hit 1.2298 high on 21st November. 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, market hit 1.1743 low on Friday and extended lower today down to 1.1689. Further weakness may open the way down to 1.1203 30th October low, which would strongly undermine the March-November 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