Dollar rose on view Federal Reserve may keep rates on hold or even raise them by year

The Dollar rose broadly on Wednesday as a better-than-expected report on US durable goods orders for April bolstered the view the Federal Reserve may keep interest rates on hold or even raise them by year-end. Demand for the greenback also rose after reports showed rising German inflation and Oil prices eased from recent record highs. Oil prices traded well below last week’s record at $135.09 a barrel. Yesterday German inflation May data supported expectations for the ECB to retain its hawkish, inflation-fighting stance despite signs of an economic slowdown seen in recent sentiment surveys from euro-zone member states. Other data in Europe showed the outflow of investment from the euro-zone accelerated in March.

News and Events:

The Dollar rose broadly on Wednesday as a better-than-expected report on US durable goods orders for April bolstered the view the Federal Reserve may keep interest rates on hold or even raise them by year-end. Demand for the greenback also rose after reports showed rising German inflation and Oil prices eased from recent record highs.

US short-term interest rate futures show that investors widely expect the Federal Reserve to raise interest rates by 25bp to 2.25% by year-end.

Yesterday EurUsd was 0.21% down at 1.5656. UsdJpy traded as high as 105.31 and was last up 0.39% at 104.65. GbpUsd went 0.32% up at 1.9814. UsdChf was up 0.34% at 1.0372.

Yesterday German inflation May data supported expectations for the ECB to retain its hawkish, inflation-fighting stance despite signs of an economic slowdown seen in recent sentiment surveys from euro-zone member states. Other data in Europe showed the outflow of investment from the euro-zone accelerated in March. Analysts said the euro may still rebound to recent one-month highs even after weak data as the ECB’s policy stance is seen unchanged.

Oil prices traded well below last week’s record at $135.09 a barrel.

Today’s Key Issues (time in GMT):

09:00 EUR May Euro-zone Business Climate 0.4 vs 0.44
09:00 EUR May Euro-zone Consumer sentiment -12 vs -12
09:00 EUR May Euro-zone Industrial sentiment -2 vs -2
09:00 EUR May Euro-zone Services sentiment 7 vs 7
12:30 USD Q1 Core PCE prices 2.2% vs 2.2%
12:30 USD Q1 PCE prices 3.5% vs 3.5%
12:30 USD Q1 Corporate Profits -2.9% vs -3.3%
12:30 USD Q1 GDP deflator 2.6% vs 2.6%
12:30 USD Q1 GDP preliminary 0.9% vs 0.6%
12:30 USD Q1 GDP sales preliminary 0.1% vs -0.2%
12:30 USD weekly Initial claims 370k vs 365k
12:30 USD weekly Jobless continuing claims 3�080k vs 3�037k
12:30 CAD Q1 Current account Cad 2.9B vs -0.51B
23:01 GfK Consumer confidence -26 vs -24
23:30 JPY April CPI core nationwide 1% vs 1.2%
23:30 JPY May CPI core Tokyo 0.9% vs 0.7%
23:30 JPY April Jobs/applicants ratio 0.94 vs 0.95
23:30 JPY April Unemployment rate 3.9% vs 3.8%
23:30 JPY May Industrial output preliminary -0.3% vs -3.4%

The Risk Today:

EurUsd: Market failed to overtop 1.5800 early this week. On downside, only a return below previous week 1.5600 would open the way down to 1.5000 psychological key level before 1.4500 pivot point. Support holds 1.5693 Thursday low. Initial support holds 1.5697 Friday low. Initial resistance holds 1.5819 Tuesday high. A return in previous 1.5600-1.5800 consolidation range would reopen the way up to 1.6000 Pivot point resistance ahead of key resistance 1.6200 market target.

GbpUsd: Cable broke up the upper Trendline resistance of one-month downtrend 2.0398 � 1.9364 last week. This move over 1.9720 may reopen the way up to 1.9800 and 2.0000 psychological level. On the downside, a reversal below 1.9600 might bring again focus on 1.9337 January low and 1.9105 (50% retracement of 1.7049 � 2.1162 advance). Strong support holds 1.9363 20th February and 14th May low.

UsdJpy: Recent 1 �-month uptrend found resistance around 105. Market broke last week the lower Trendline support. This recent profit taking on 105 might send the market back down to 100 � 104 consolidation trading range. Minor support holds 102.58 May 9th low. Renewed strength over 105 would put 110.10 strong resistance (Trendline) into focus and mid January double top ahead of 111.92 early January high.

UsdChf: Market hit 1.0625 two-month high on May 8th. After hitting 1.0224 low this week, it is back in 1.0400-1.0600 trading range. Initial resistance holds 1.0625 May 8th high. Early January double top 1.1191 marks strong resistance. Initial support holds 1.0216 Friday low. A return below 1.0400 would open the way down to 1.0200 and maybe toward 0.9639 17th March low

Resistance and Support:

By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland