The Dollar slipped in early trade on Monday on disappointment that finance ministers from the Group of Eight (G8) countries failed to address the weakness of the US currency at a meeting over the weekend in Japan. Many traders had expected ministers to discuss currencies after a series of comments linking a weak Dollar and rising Oil prices, but most appeared more worried about slowing growth in economies hit by a credit crisis. French Economy Minister Christine Lagarde said Dollar weakness and commodity price inflation were inextricably linked. Paulson said on Saturday he disagreed, and stuck only to his oft repeated line that the United States supported a Strong Dollar. Last Friday, the Dollar jumped against the Euro on Friday and notched up its best week against a basket of currencies since 2005 as mounting inflation fears had investors bracing for Federal Reserve interest rate hikes this year.
News and Events:
The Dollar slipped in early trade on Monday on disappointment that finance ministers from the Group of Eight (G8) countries failed to address the weakness of the US currency at a meeting over the weekend in Japan. Many traders had expected ministers to discuss currencies after a series of comments linking a weak Dollar and rising Oil prices, but most appeared more worried about slowing growth in economies hit by a credit crisis.
Last month, the Dallas Federal Reserve said the Dollar’s slide had contributed about 1/3 of a $60 increase in oil prices between 2003 and 2007. French Economy Minister Christine Lagarde said Dollar weakness and commodity price inflation were inextricably linked. Paulson said on Saturday he disagreed, and stuck only to his oft repeated line that the United States supported a Strong Dollar. Earlier in the month, Federal Reserve Chairman Ben Bernanke flagged a change by linking the weaker Dollar to inflation, saying he was watching the currency closely with the Treasury. Paulson then refused to rule out intervention, helping the US Dollar post its biggest one-week gain against the Euro in three years.
Last Friday, the Dollar jumped against the Euro on Friday and notched up its best week against a basket of currencies since 2005 as mounting inflation fears had investors bracing for Federal Reserve interest rate hikes this year.
The Euro also softened after Irish voters rejected a treaty promoting closer European Union unity, putting wide-ranging institutional reform plans at risk and sending the Euro to a one-month low at 1.5304. It ended down 0.41% to 1.5385. UsdJpy also hit a near-four month high of 108.39 before paring gains to trade up 0.26% at 108.19. For the week, UsdJpy was up 3.12%, poised for its biggest weekly gain in more than four years. The Bank of Japan kept interest rates steady at 0.5% on Friday, as widely expected. UsdChf was up 0.59% at 1.0469 after hitting intraday 1.0541 high. GbpUsd was flat at 1.9470.
Today’s Key Issues (time in GMT):
07:15 CHF April Retail Sales 2% vs -2.5%
07:00 EUR EU Foreign Ministers� meeting, Luxembourg
09:00 EUR May CPI ex-food/energy 0.3% vs 0.2% (MoM)
09:00 EUR May CPI ex-food/energy 2.5% vs 2.4% (YoY)
09:00 EUR May CPI 0.6% vs 0.3% (MoM)
09:00 EUR May CPI ex-food/energy 3.6% vs 3.3% (YoY)
12:30 USD June NY Fed manufacturing -2 vs -3.23
12:30 CAD April New Vehicle sales 1.25% vs -0.5%
13:00 USD April Net Long-term TIC flows $71.5B vs $80.4B
14:00 USD Fed�s Bernanke speaks on health-care reform, Washington
19:00 USD June NAHB housing Market Index 19 vs 19
19:00 USD Fed�s Lacker speaks on the economy, South Carolina
The Risk Today:
EurUsd: Market posted 1.5844 high on Monday before turning 3cts lower as low as 1.5379 yesterday. Market shall wait for a return over 1.5800 to confirm Euro is breaking up 1.5400-1.5800 consolidation range. This would reopen the way up to 1.6000 Pivot point resistance ahead of key resistance 1.6200 market target. On downside, further weakness below 1.5400 will put the light 1 �-month uptrend on hold. This may open way down to 1.5000 psychological key level. Support holds 1.5379 Thursday low. Initial resistance holds 1.5587 Wednesday high.
GbpUsd: Cable is turning over the upper Trendline resistance of two-month downtrend 2.0398 � 1.9364 late May, searching for direction. Trading range is set 1.9400 � 1.9850. Psychological 2.0000 level stays into focus. On the downside, current 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: Current trend started early this week hit 108.08 yesterday high and 3-month high. This would put 110.10 strong resistance (Trendline) into focus and mid January double top ahead of 111.92 early January high. Any profit taking to and lower than 105 level might send the market back down to 100 � 104 consolidation trading range. Minor support holds 102.58 May 9th low. Initial support holds 104.44 Monday low.
UsdChf: Market is back again in 1.0400-1.0600 trading range. Early January double top 1.1191 marks strong resistance. Initial support holds 1.0148 Monday low. Further weakness may open the way toward 0.9639 17th March low. Market tested 1.0490 high which holds now initial resistance.
Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland