Dollar stays near record low vs Euro on concerns about US Housing Market
The dollar was little changed against the euro on Thursday, trading just above an all-time low, as concerns about the U.S. housing market and its impact on consumers continued to sour investors on the greenback. A second day of testimony from Federal Reserve Chairman Ben Bernanke provided added ammunition for dollar bears when he told the Senate Banking Committee that losses on sub-prime mortgages could hit $100 billion and curb consumer spending. Bernanke began his semi-annual testimony on Wednesday, when he announced the Fed had trimmed growth forecasts for this year and next but reiterated that inflation is its top concern. Markets interpreted that to mean the Fed probably won�t cut benchmark interest rates this year.
News and Events:
The dollar was little changed against the euro on Thursday, trading just above an all-time low, as concerns about the U.S. housing market and its impact on consumers continued to sour investors on the greenback.
A second day of testimony from Federal Reserve Chairman Ben Bernanke provided added ammunition for dollar bears when he told the Senate Banking Committee that losses on sub-prime mortgages could hit $100 billion and curb consumer spending. Bernanke began his semi-annual testimony on Wednesday, when he announced the Fed had trimmed growth forecasts for this year and next but reiterated that inflation is its top concern. Markets interpreted that to mean the Fed probably won�t cut benchmark interest rates this year despite a deepening housing slump but that hasn�t provided much of a boost for the dollar.
Minutes from the Fed�s June policy meeting released Thursday showed officials see the housing sector as the biggest risk to growth and core inflation a �relatively subdued�. Analysts said �the underlying concern is still about housing and the market just doesn�t want to let go of that concern right now�.
Yesterday, EurUsd traded at 1.3798, unchanged from the prior session and below a session peak of 1.3831. It hit a lifetime high at 1.3834 on Wednesday.
The dollar also slipped against the Australian dollar, AudUsd touched an 18-year peak at $0.8811. But both the Dollar and Euro edged up against the yen as investors continued to shun the low-yielding Japanese currency in search of higher returns elsewhere.
The UsdJpy was last trading at 122.11, up 0.14%. It pared earlier gains slightly after the Philadelphia Federal Reserve�s July measure of business activity in the Mid-Atlantic region was surprisingly weak. Analysts said �there�s a great deal of volatility in this number. But to the extent that it came in weaker than expected is consistent with the lower dollar trend�. GbpUsd was down 0.25% at 2.0482 after softer-than-expected UK retail sales data, coming further off a 26-year peak of 2.0549 hit on Wednesday.
Markets expect U.S. rates to remain on hold at 5.25 percent while the Bank of England and European Central Bank are seen raising rates in September, and that has helped support sterling and the euro.
Today’s Key Issues (time in GMT):
<SITE>08.30 GB 2Q Gross Domestic Product 0.7% vs 0.7% (QoQ)
08.30 GB 2Q Gross Domestic Product 2.9% vs 3.0% (YoY)
09.00 EUR ECB�s Trichet, Liikanen speak at a seminar
15.00 US Fed�s Poole speaks on Sub-Prime Mortgages in St. Louis</SITE>
The Risk Today:
EurUsd remains strong, in 1.3760 � 1.3834 trading range, after having hit 1.3834 Wednesday new record high. A return below 1.3750 and 1.3659 former resistances will put the actual positive trend on hold. Initial minor support holds 1.3786. Minor resistance holds 1.3834.
GbpUsd bullish trend remains intact. Market hit Wednesday 26-year peak 2.0549. Further upside would be 2.0568 (equally 1.9187 to 2.0132 advance) and 2.0706 trend top. Former 2.0459 Wednesday low marks initial support. Market 2.0100 former trend resistance holds strong support. A break there will open the door back down to 2.0000 pivot point.
UsdJpy remains trading in 120.98 � 122.62 trading range. Renewed strength will focus on 124.15 late June high. A break toward 124.15 will reopen the way to 125.57 December 2002 high. Initial support holds 120.98 level. A break down 120.78 strong support may put 119.55 in sight.
UsdChf remains weak but consolidating after the Wednesday volatile market range 1.1962 to 1.2051. On the recent downtrend, focus may shift on 1.1881 early December low and 1.1739 April 2005 trend supports. Former support 1.2234 marks resistance after initial resistance 1.2051 yesterday high. Rebound from current situation may target 1.2082 resistance (23.6% retracement of 1.2470 to 1.1962 decline).
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Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland