The Dollar slipped against the Euro on Friday on tame inflation data, but rallied to a fresh 4-1/2-year high against the Yen after the Bank of Japan indicated it was in no hurry to raise interest rates. Japan’s interest rates, which at 0.5% are the lowest in the developed world, continue to weigh on the Yen, especially after the Japan’s Central Bank ended a policy meeting with no clear signals of a forthcoming rate increase. At a news conference after the BoJ’s policy board decided unanimously to keep rates unchanged, Fukui said he had no preconceived ideas on whether the BoJ should raise rates in July or at any particular time in the future.
With inflation data out of the way, market players will look to figures on US housing starts and building permits due on Tuesday to see if a downturn in the housing market, a soft spot of the economy, has yet to finally bottom out.
News and Events:
The Dollar slipped against the Euro on Friday on tame inflation data, but rallied to a fresh 4-1/2-year high against the Yen after the Bank of Japan indicated it was in no hurry to raise interest rates. The Dollar has touched fresh highs against the Yen for the past three sessions and posted its biggest weekly gain against the Yen so far this year after buyers pushed the US Currency up through several technical resistance levels against the Japanese currency.
Japan’s interest rates, which at 0.5% are the lowest in the developed world, continue to weigh on the Yen, especially after the Japan’s Central Bank ended a policy meeting with no clear signals of a forthcoming rate increase. At a news conference after the BoJ’s policy board decided unanimously to keep rates unchanged, Fukui said he had no preconceived ideas on whether the BoJ should raise rates in July or at any particular time in the future. UsdJpy rose to a high of 123.67, before it surrendered some gains to trade at 123.44, up 0.33%. EurJpy rose to a record high of 165.29 on Friday, before giving back some gains to trade at 165.23 +0.89%.
EurUsd was up 0.58% to 1.3387 following reports showing Core Consumer Prices (ex-food & energy), rose in May at the slowest pace since March 2006, factory output slowed and Consumer Confidence dropped more sharply than expected. It was the Euro’s biggest one day percentage gain against the Dollar in two months.
Other reports showed the US current account deficit widened in the 1Q, but less than expected, to $192.58B from $187.94B in the 4Q last year. Also on Friday, the deficit for full-year 2006 was revised down by $45B to $811.48B.
With inflation data out of the way, market players will look to figures on US housing starts and building permits due on Tuesday to see if a downturn in the housing market, a soft spot of the economy, has yet to finally bottom out.
Today’s Key Issues (time in GMT):
09.15 CHF 1Q Industrial Production previously 7.8% (QoQ)
09.15 CHF 1Q Industrial Production 7.9% vs 8.9% (YoY)
10.00 EUR ECB’s Gonzalez-Paramo speaks in Valencia
12.30 CAD International Securities Transactions CAD 3.00B vs 4.66B
16.00 EUR ECB’s Trichet speaking in Montreal
17.00 US June NAHB Housing Market Index 29 vs 30
23.00 US Fed’s Minehan gives welcome remarks at Bank’s Conference
The Risk Today:
EurUsd rebounded on recent support in the 1.3260 � 1.3280 area. Strong Friday advance broke up 1.3373 resistance. Further advance might open the way toward 1.3500 and 1.3554 resistance from early June high. Renewed weakness might chase the 1.3277 key support (50% retracement from 1.2872 to 1.3681 advance). Initial support holds 1.3306 Friday’s low.
GbpUsd also reversed from previous week down pressure. The rebound over 1.9823 support (61.8% retracement of the 1.9733-1.9969 rise) keeps us away from 1.9677 trend low and next support at 1.9659 (50% retracement of the 1.9184 to 2.0134 advance). Resistance zone is located at 1.9793 has been broken today and is looking ahead of 1.9900 key level.
UsdJpy bull trend remains strong having broken 122.22 former trend high. Market hit Friday 123.63 high which marks now the initial resistance. Further advance might open the way toward 125.57 December 2002 high. Initial support holds 122.22 (former Trendline).
UsdChf ended its six consecutive day advance on Friday. Market hit 1.2470 high last Thursday which marks the initial resistance. Return of the Dollar bull trend would open the way for a run toward 1.2573 and 1.2771 trends high. On the downtrend, market is looking for next support 1.2359 (23.6% retracement of 1.1996 to 1.2470 advance).
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Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland