The Dollar tumbled to a 26-year low against Sterling and declined across the board on Monday on continuing expectations that US interest rates will remain steady while borrowing costs rise overseas. The Dollar fell within 0.5% of a record low against the Euro, extending Friday’s heavy losses in the wake of soft reports on US Consumer Price inflation and Personal Income and Spending.
The Bank of England is expected to raise interest rates on Thursday. The European Central Bank, which is expected to leave interest rates on hold when it meets on Thursday, is also expected to tighten monetary policy in coming months, reducing the relative allure of the Dollar at a time when the Federal Reserve is expected to keep US interest rates on hold.
Trade is expected to be thinner this week due to the July 4 Independence Day holiday in the United States, which comes ahead of Friday’s closely watched US non-farm payrolls report.
News and Events:
The Dollar tumbled to a 26-year low against Sterling and declined across the board on Monday on continuing expectations that US interest rates will remain steady while borrowing costs rise overseas. The Dollar fell within 0.5% of a record low against the Euro, extending Friday’s heavy losses in the wake of soft reports on US Consumer Price inflation and Personal Income and Spending.
A reading of manufacturing activity released on Monday had little impact on markets. Reports on Factory Orders, Durable Goods and June payrolls are to be released later today. Analyst said: �the outlook for rates doesn’t favor the Dollar in the near term, but it may be too soon to completely write off the currency before we see the remaining economic releases and the Central Bank meetings still due this week�.
The Bank of England is expected to raise interest rates on Thursday. The European Central Bank, which is expected to leave interest rates on hold when it meets on Thursday, is also expected to tighten monetary policy in coming months, reducing the relative allure of the Dollar at a time when the Federal Reserve is expected to keep US interest rates on hold.
Trade is expected to be thinner this week due to the July 4 Independence Day holiday in the United States, which comes ahead of Friday’s closely watched US non-farm payrolls report.
Traders also sold the Dollar on concerns that the United States may be a target following an attack on Glasgow airport and foiled attempts to detonate car bombs in London last week.
Yesterday, GbpUsd hit a 26-year high at 2.0186 ahead of the Bank of England’s meeting on Thursday when it is expected to raise rates by a quarter percentage point to 5.75%. EurUsd was up 0.57% to 1.3621 and in sight of a record high 1.3681 hit in April.
Today’s Key Issues (time in GMT):
08.00 EUR ECB’s Bini Smaghi speaks in Rome
08.30 UK June Purchasing Managers Index � construction 57.7 vs 58
09.00 EUR May Euro-zone PPI 0.3% vs 0.4% (MoM)
09.00 EUR May Euro-zone PPI 2.4% vs 2.4% (YoY)
09.00 EUR May Euro-zone Unemployment Rate 7.1% vs 7.1%
13.45 EUR ECB’s Trichet speaks in Frankfurt
14.00 US May Factory Orders -1.2% vs 0.3%
14.00 US May Pending Home Sales 0.6% vs -3.2%
21.00 US July 1st ABC Consumer Confidence -12 vs -12
23.01 GB June Nationwide Consumer Confidence 97 vs 99
23.30 AUD Reserve Bank of Australia Rate Decision 6.25% vs 6.25%
The Risk Today:
EurUsd Remains positive in the trend started Mid-June at 1.3263. Market reached 1.3639 yesterday high heading for 1.3681 April high. Focus shift on 1.3681 high from April 27th before 1.3750 trend high. A return below 1.3554 and 1.3522 former resistances will put the actual positive trend on hold. Any further set back lower than 1.3373 could open the way toward 1.3277 key support (50% retracement from 1.2872 to 1.3681 advance). Initial support holds 1.3346 last Friday high.
GbpUsd hit 2.0186 high yesterday completing the 3-week bull trend from Friday 8 June. Further advance will again focus on 2.0173 trend high and 2.0186 26-year high. Initial support holds 2.0100 former resistance. On the down side, a return under 1.9900 could deep toward 1.9700 and 1.9659 (50% retracement of the 1.9184 to 2.0134 advance) next support.
UsdJpy hit yesterday 122.10 low testing through 122.24 support and former Trendline. Further weakness could open the way toward 119.55 trendline; down 120.78 double bottom from 7-8 June. On the uptrend, renewed advance through 124.15 will reopen the way toward 125.57 December 2002 high.
UsdChf reversed deeply from mid-June 1.2472 high. Yesterday, market broke through 1.2178 support (61.80% retracement of 1.1996 � 1.2472 advance) and went down to 1.2092 low. The 3-months high 1.2472 marks the strong resistance. On the current downtrend, focus shifted on 1.1996 trend low support. Former support 1.2178 marks the initial resistance before 1.2234.
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Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland