The Dollar rallied against majors currencies as rising US Treasury yields gets investors confused and expectations of a near-term cut in US interest rages have faded, sending bond yield higher. �The Dollar’s getting support from Treasury yields� said analysts, but they are waiting for US retail sales, CPI and PPI later this week which may determine the Dollar’s direction.
Investors will also be watching the US Treasury’s semiannual report on International Economic and Exchange Rate Policies today, for any comments on China’s Yuan. The Yuan on Tuesday posted its largest gain against the Dollar since its July 2005 revaluation, rebounding from a 3-day slide after the Central Bank set a much higher reference rate for the Chinese currency. US policy-makers have argued that China’s managed currency policy artificially weakens the Yuan, favors Chinese exports and widens the US trade gap. While the Treasury report is not expected to label China a currency manipulator, investors may remain cautious ahead of the report.
News and Events:
The Dollar rallied against the Euro for the fifth consecutive session on Tuesday to an 11-week 1.3301 high, as rising US Treasury yields gets investors confused and expectations of a near-term cut in US interest rages have faded, sending bond yield higher. With few major US economic indicators on Tuesday, dealers stuck to buying Dollars based on the recent advantage of US government bond yields over other government debt. �The Dollar’s getting support from Treasury yields� said analysts, but they are waiting for US retail sales, CPI and PPI later this week which may determine the Dollar’s direction. Some analysts cautioned that views on the Dollar could change, depending on what information is gleaned today from US data.
Investors will also be watching the US Treasury’s semiannual report on International Economic and Exchange Rate Policies today, for any comments on China’s Yuan. The Yuan on Tuesday posted its largest gain against the Dollar since its July 2005 revaluation, rebounding from a 3-day slide after the Central Bank set a much higher reference rate for the Chinese currency. US policy-makers have argued that China’s managed currency policy artificially weakens the Yuan, favors Chinese exports and widens the US trade gap. While the Treasury report is not expected to label China a currency manipulator, investors may remain cautious ahead of the report. They will also closely monitor the unveiling of a bill in the Senate on Wednesday that would allow the US to impose penalties on countries setting their currencies artificially low.
EurUsd traded down -0.39% at 1.3302, its lowest level since March 30. UsdJpy hit a 4-1/2 year high this morning at 122.33 getting boost from the rally in US Treasury yields.
Today’s Key Issues (time in GMT):
08.30 GB May jobless claims change -8k to 8.4k vs -15.7k
08.30 GB April Avg Earnings including Bonus 4.4% to 4.5% vs 4.5%
08.30 GB April ILO Unemployment Rate 5.5% unchanged
12.30 US May Import Price Index 0.3% vs 1.3% (MoM)
12.30 US May Export Price Index 0.3% vs 0.3% (MoM)
12.30 US May Advance Retail Sales 0.6% vs -0.2% (MoM)
12.30 US May Advance Retail Sales less Auto 0.7% vs -0.0% (MoM)
12.40 US Fed’s Geithner speaks on Asia, Economy & Finance in Singapore
14.00 US April Business Inventories 0.3% -0.1%
14.30 GB April Leading Indicator Index previously 0.6% (MoM)
15.40 CAD Bank of Canada Governor Dodge speaks at St.John’s BoT
17.00 EUR ECB’s Trichet speaks in Berlin
17.00 US Fed’s Fisher speaks on Texas economy in Dallas
The Risk Today:
EurUsd break of the 1.3371 former support reinforced the short-term bear trend developing from the 1.3681 late-April high, and leaves little support till the 1.3277 (50% retracement from 1.2872 to 1.3681 advance). Further weakness might open the way toward 1.3247 end March low. Meanwhile, resistance is located around Friday’s high at 1.3430.
GbpUsd pushed through 1.9823 former support (61.8% retracement of the 1.9733-1.9969 rise) and the breakout high from May 31. This paves the way for a deeper retreat towards 1.9677 trend low. This could resume bear trend towards 1.9659 (50% retracement of the 1.9184 to 2.0134 advance) and further setback towards 1.9592, April 9 low. Resistance zone is located at 1.9793 Friday’s high.
UsdJpy breaking up above 122.22 trend high put the Bull trend back in focus. Looking for more advance to 122.38 (61.8% of 135.18-101.65 big 5 years decline). Former resistance 122.14 marks now minor support.
UsdChf’s sharp push from last week’s 1.2148 low has moved through the 1.2356 high from March 9 and clears the way for a run toward 1.2438 (76.4% retracement of the 1.2575-1.1994 decline). Focus will go on 1.2573 and 1.2771 trends high.
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Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland