The Dollar slipped on Tuesday, a day after its strongest rally against the Euro in more than a year, as rebounding global stock markets rekindled investors’ appetite for risky assets.
Market attention is also focused on Wednesday’s US Existing Home Sales report amid fears the data would point to a further deterioration in the housing market and increase the chances of more Federal Reserve interest rate cuts this year.
Firmer equity markets prompted some investors to move back into carry trades, hitting the Yen and boosting high-yielding currencies such as the Australian, New Zealand and Canadian dollars.
News and Events:
The Dollar slipped on Tuesday, a day after its strongest rally against the Euro in more than a year, as rebounding global stock markets rekindled investors’ appetite for risky assets.
Market attention is also focused on Wednesday’s US Existing Home Sales report amid fears the data would point to a further deterioration in the housing market and increase the chances of more Federal Reserve interest rate cuts this year.
At yesterday close, the Euro was up 0.59% against the Dollar at 1.4257. While the data will not on their own prompt the central bank to ease, the prospect of problems in the broader economy will force the Fed’s hand to promote growth, analysts say. US interest rate futures are pricing in a roughly 86% implied chance of a 0.25% cut in the federal funds target rate to 4.50% at the end of their Oct. 30-31 policy meeting. Such a step, coming after September’s 0.5% cut, would further reduce the appeal of dollar-denominated assets and undermine the Dollar.
GbpUsd rose 0.84% to 2.0496. UsdChf fell 0.33% 1.1736. UsdJpy rose 0.44% to 114.91 after having hit 113.26 low the day before. Firmer equity markets prompted some investors to move back into carry trades, hitting the Yen and boosting high-yielding currencies such as the Australian, New Zealand and Canadian dollars. EurJpy was up 1.03% to 163.83, its biggest one-day percentage gain in a month. GbpJpy went up 1.28% at 235.53 recovering from previous day 232.55 low. The high-yielding Australian Dollar and New Zealand Dollar gained respectively 1.24% and 1.1%. Both currencies also rose against the Yen. The Canadian Dollar touched a 33-year high against the Dollar after Canadian retail sales data for August beat expectations. UsdCad was last trading down 1.25% at 0.9663.
Today’s Key Issues (time in GMT):
New Zealand Market Holiday
24-26 Oct GBP Oct Nation Wide House price 0.3% vs 0.7% (MoM)
24-26 Oct GBP Oct Nation Wide House price 8.7% vs 9% (YoY)
08:00 EUR August Euro zone Current Account previously �3.3B
08:00 EUR Oct Euro PMI Services 54.5 vs 54.2
08:00 EUR Oct Euro PMI Composite 54.6 vs 54.7
11:00 USD Oct.19th MBA mortgage Applications previously 0.7%
14:00 USD Sept Existing Home Sales 5250k vs 5500k
14:00 USD Sept Existing Home Sales -4.5% vs -4.3%
20:00 NZD Reserve Bank of Zew Zealand interest rates 8.25% vs 8.25%
The Risk Today:
EurUsd hit new high 1.4349 on Monday. Last week break up 1.4280 opened the way through 1.4333 strong resistance. Next resistance holds 1.4400. On the downside, a return below 1.4280 former resistance and break down 1.4165 support may open the way down to 1.4000 nearby support and 1.3927 where a lower development would threaten the up-trend. On a long term view, it would need a return below 1.3719 to confirm trend change. Initial support holds 1.4165.
GbpUsd hit earlier Monday a new 3-month 2.0539 high. Initial resistance still hold 2.0500 key level. On the downside, it would need renewed pressure below 2.0200 and further weakness toward 2.0000 psychological level and 1.9880 support to confirm trend change. Beyond that point, 1.9821 marks strong support (76.4% retracement of 1.9652 to 2.0366 advance).
UsdJpy looks negative following Monday 113.26 low test. Further drop might follow toward 112.61 and retest of ultimate 111.60 (August 17 low). On the upside, it still need a confirmation over 117.63 resistance to open the way for further extend toward 119.06 (61.8% retracement of 123.67 to 111.60 decline).
UsdChf dropped down to 1.1602 on Monday. Initial resistance holds 1.1790 (23.6% retracement of 1.2477 to 1.1577 decline) and strong resistance 1.1923 (38.2%). However, recent downtrend development below 1.1680 key level may reopen the way toward 1.1500 psychological support and possibly 1.1484 (2005 March 14 low).
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Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland