The Dollar was stronger on Tuesday as investors continue to seek for safety. Market players remain prudent as the euro zone and Japan are already falling into recession in Q3 and US data are showing a sharp slide in home prices for Q3 and a record decline in producer prices last month. Fears about the future of US automakers also darkened investors’ mood as Treasury Secretary Henry Paulson reiterated his opposition to diverting $25 billion from a $700 billion financial bailout program to rescue Detroit. Paulson said during testimony before Congress, “would not be a good thing,” to see General Motors, Ford Motor Co or Chrysler filing for bankruptcy in the current environment but added that the bailout package was meant for financial services firms.
News and Events:
The Dollar was stronger on Tuesday as investors continue to seek for safety. But a late rally on Wall Street limited dollar gains against Euro and Sterling and boosted it against the Yen on hopes that financial market turmoil may be starting to ease. Market players remain prudent as the euro zone and Japan are already falling into recession in Q3 and US data are showing a sharp slide in home prices for Q3 and a record decline in producer prices last month.
In the last 5 months the Dollar has rallied as the US and global outlook has worsened, with investors pulling money out of commodities, stocks and high-yield currencies and returning into safe-haven assets such as US Treasuries. According to Treasury data released Tuesday, foreigners bought $143.4 billion of US securities in September, the largest net inflow since early 2006. Testifying before Congress on Tuesday, Federal Reserve Chairman Ben Bernanke said massive demand for the Dollar means it remains unrivaled as the world reserve currency.
UsdJpy traded 0.39% higher at 96.76, off its 97.41 session peak. EurUsd was unchanged at 1.2636 while GbpUsd lost 0.19% at 1.4958. EurJpy rose 0.34% at 122.27. GbpJpy was 0.2% higher at 144.74. UsdChf surged into new high at 1.2047 closing up 0.26% at 1.2019.
Fears about the future of US automakers also darkened investors’ mood as Treasury Secretary Henry Paulson reiterated his opposition to diverting $25 billion from a $700 billion financial bailout program to rescue Detroit. Seeing General Motors, Ford Motor Co or Chrysler fail in the current environment “would not be a good thing,” Paulson said during testimony before Congress, but added that the bailout package was meant for financial services firms. The big three carmakers have warned of dire consequences for the auto industry if one or more is forced to.
Today’s Key Issues (time in GMT):
08:00 EUR Q3 GDP -0.2% vs 0.1% (qoq)
08:00 EUR Q3 GDP 0.9% vs 1.8% (yoy)
09:30 AUD Reserve Bank Governor Stevens speaks in Melbourne
09:30 GBP BoE minutes of Interest rate decision
11:00 GBP novembre CBI trends � orders -41 vs -39
13:30 USD October Building permits 780k vs 805k
13:30 USD October Housing starts 780k vs 817k
13:30 USD October CPI ex-food/energy 0.1% vs 0.1% (mom)
13:30 USD October CPI ex-food/energy 2.4% vs 2.5% (yoy)
13:30 USD October CPI inflation -0.8% vs 0.0% (mom)
13:30 USD October CPI 4% vs 4.9% (yoy)
13:30 USD October Real weekly earnings 0.5% vs 0%
13:30 CAD October Lead indicators -0.3% vs -0.2%
13:30 CAD September Securities Foreign �C$1.2b vs �C$0.73b (mom)
14:00 USD Fed�s Kohn speaks on asset prices at Cato conference
18:30 USD Fed�s Lacker speaks at conference on Subprime Crisis
18:40 GBP BoE�s Gieve and Bean give speech
19:00 USD Minutes of Oct. 28-29th FOMC meeting
The Risk Today:
EurUsd: Market dropped as low as 1.2330 on October 28th and sharply rebounded to 1.3298 high Thursday last week. This shows actual trading range 1.2330 � 1.3298 drawing a triangle consolidation pattern. On the downside, renewed weakness will 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. On the 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 ahead of strong resistance 1.3769 14th October high.
GbpUsd: Market dropped as low as 1.4558 last Thursday 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).
UsdJpy: Market has been holding slightly below 99.80 September-October trendline resistance in the latest weeks and drop to 94.47 last week. Initial resistance holds 97.55 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. 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 1.2080 new 1-year high this morning. Further strength may open the way over 1.2153 trendline resistance. Next resistance holds 1.2463. 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