The Dollar edged lower against the Euro and trimmed gains versus other European currencies on Wednesday as comments from a Federal Reserve official and a key economic report affirmed expectations for further rate cuts. However, it posted steep gains against the Yen, buoyed by sharp gains in the stock market, with investors going back into riskier assets. Government data showing New Orders for long-lasting US-made goods dropped for a third month in October, with companies appearing wary about making new investments. Most analysts believe the Dollar could further decline given the weak tone in US economic data and the trickle of bad news from financial companies hit by the credit crunch. The Fed is widely expected to cut interest rates by 0.25 in December to 4.25% and again next year to stem economic fallout from the housing debacle.
News and Events:
The Dollar edged lower against the Euro and trimmed gains versus other European currencies on Wednesday as comments from a Federal Reserve official and a key economic report affirmed expectations for further rate cuts. However, it posted steep gains against the Yen, buoyed by sharp gains in the stock market, with investors going back into riskier assets. Fed Vice Chairman Donald Kohn said renewed financial market turmoil could slow the US economy more abruptly than thought, signaling a willingness to cut US interest rates further. His comments were consistent with the Fed’s “Beige Book” report, which said the US economy from October to mid-November grew at a slower pace than in the previous period. The report also said US housing demand was “quite depressed”. Analyst said “The dollar is going to stay under pressure as long as markets continue to anticipate near-term Fed easing” adding “Markets have moved once again to fully price in a rate cut in December.” EurUsd edged up to 1.4839 +0.02% after trading lower for most of the session. It fell earlier to 1.4712, a one-week low. UsdJpy traded 1.05% higher at 109.96 after trading as high as 110.48, a one-week high. Gains in the Dollar versus the Yen were in line with a surge in the US stock market, which rose on the view that more Fed rate cuts are forthcoming. EurJpy rose 1.07% against the Yen to 163.17, while the high-yielding Australian dollar jumped 2.02% to 97.43 against Yen. UsdChf rose 0.5% to 1.1108, hitting earlier a one-week peak of 1.1195. The Dollar had surrendered some of the session’s earlier gains after government data showing New Orders for long-lasting US-made goods dropped for a third month in October, with companies appearing wary about making new investments. Most analysts believe the Dollar could further decline given the weak tone in US economic data and the trickle of bad news from financial companies hit by the credit crunch. The Fed is widely expected to cut interest rates by 0.25 in December to 4.25% and again next year to stem economic fallout from the housing debacle.
Today’s Key Issues (time in GMT):
07:00 GBP November nationwide House Prices �0.8% vs 1.1% (MoM)
07:00 GBP November nationwide House Prices 6.9% vs 9.7% (MoM)
07:00 EUR Germany ILO Unemployment Rate 8% vs 8.1%
09:30 GBP October Net Consumer Credit �1.1B vs �1.35B
09:30 GBP October Mortgage Approvals 97k vs 102k
13:30 CAD October Industrial Producer Price -0.8% vs -0.9%
13:30 CAD October Raw Material Price Index 0.5% vs -0.9%
13:30 CAD 3Q Current Account CAD$ 3.4B vs 8.36B
13:30 USD 3Q GDP Annualized 4.8% vs 3.9%
13:30 USD 3Q Personal Consumption 2.8% vs 3%
13:30 USD 3Q GDP Price Index 0.8% vs 0.7%
13:30 USD 3Q Core PCE 1.8% vs 1.8% (QoQ)
13:30 USD November 24th, Initial Jobless Claims 332k vs 330k
15:00 USD October New Home Sales 750k vs 770k
15:00 USD October New Home Sales -2.6% vs 4.8% (MoM)
15:00 USD 3Q House Price Index -0.5% vs 0.1% (QoQ)
23:50 JPY October Jobless rate 4% vs 4%
23:50 JPY October Overall Household Spending 0.6% vs 3.2%
23:50 JPY November Tokyo CPI 0.3% vs 0.1%
The Risk Today:
EurUsd Euro remains in a positive trend but pulling back from last Friday new record high 1.4967. It might return down to two weeks ago support on 1.4520. For now, it is currently consolidating in between 1.4800 and 1.4850. On the downside, only a return below 1.4500 and further drop to 1.4280 former resistance would threaten the uptrend. This could open the way down toward 1.4000 nearby support and 1.4125 trendline support. Initial support holds 1.4800
GbpUsd Following early November heavy drop, Cable found support last week around 2.0600. On the upside, 2.1161 high (Friday 9th) marks the strong resistance before putting 2.1355 May 11th 1981 into focus. Initial resistance holds 2.0764 Friday high. Strong resistance holds 2.0844 Nov 14th high. On the downside, a strong return below 2.0525 may open a market reversal. But it would need renewed pressure below 2.0200 and further weakness toward 2.0000 psychological levels to validate a downtrend. Initial support holds 2.0525.
UsdJpy Trend remains bearish even with last two days pullback. UsdJpy mostly drop last week posting new lows. It hit 107.22 on Monday, 2 �-year low. On the downtrend, supports hold 106.50 June 2005 low and 101.68 January 2005 low. On the upside, market needs a return over 109 and 114 to undermine the actual downtrend. This may open the way toward 117.63 resistance. Initial resistance holds 110.50 yesterday high.
UsdChf Downtrend remains heavy, even with recent rebound from Friday 1.0888 low. This extreme low was following the recent break toward the 12-year low 1.1110 from April 1995. Market had found support on 1.1000 key level. Initial resistance holds 1.1300 (12th Nov) high. It would also need a return over 1.1500 and 1.1640 level to relieve actual bear threat.
Resistance and Support:
By[B] Jean-Claude Braha [/B]- ACM Advanced Currency Markets, Geneva, Switzerland