The Dollar is holding mostly steady early on Monday after a weekend meeting of industrialized nations passed with little comment on currencies, though the Euro found some support as the ECB challenged talk of early rate cuts. The Group of Seven (G7) finance ministers cautioned that the global credit crunch would drag on the world economy but left it to individual countries to take their own remedial action. Canadian Dollar was the biggest mover on Friday after strong domestic employment data seemed to argue against aggressive rate cuts there. UsdCad was down 1.04% to 0.9989 at Friday close. However, Bank of Canada Governor Mark Carney on the weekend said further rate cuts would likely be needed even though the economy had proved resilient so far. Japanese National Foundation Day Holiday & Chinese New Year till Tuesday.
News and Events:
The Dollar is holding mostly steady early on Monday after a weekend meeting of industrialized nations passed with little comment on currencies, though the Euro found some support as the ECB challenged talk of early rate cuts. The Group of Seven (G7) finance ministers cautioned that the global credit crunch would drag on the world economy but left it to individual countries to take their own remedial action. The single currency was aided by European Central Bank President Jean-Claude Trichet who warned the market not to bet on a cut in interest rates because of persistent inflation pressures in the euro zone. Euro zone finance ministers also sounded relatively relaxed about the Euro’s strength against the US Dollar. However, Investors still seem to be betting that Europe has not de-coupled completely from the United States and will be impacted badly enough to force a policy easing in coming months. Such speculation dragged the EurUsd down 3cts or 2.01% last week, taking it as low as 1.4440 at one point. On Friday, EurUsd edged up 0.26% to 1.4564. Ahead of Monday expected thin market as Tokyo is close while China is still celebrating Lunar New Year. UsdJpy was sitting at 107.31, unchanged, as risk aversion kept the Japanese currency underpinned. The biggest mover on Friday had been the Canadian dollar, which jumped after strong domestic employment data seemed to argue against aggressive rate cuts there. However, Bank of Canada Governor Mark Carney on the weekend said further rate cuts would likely be needed even though the economy had proved resilient so far. UsdCad was down 1.04% to 0.9989 at Friday close. AudUsd was holding firm at 0.8956, benefiting from speculation the Reserve Bank of Australia could raise rates again, having lifted them to an 11-year peak of 7% last week. The central bank issues its quarterly statement on monetary policy later on Monday and is expected to talk tough on inflation, leaving the door open for more tightening if the red-hot economy did not cool soon.
Today’s Key Issues (time in GMT):
00:00 JPY Chinese New Year till Tuesday
00:00 GBP Japanese National Foundation Day Holiday
09:30 GBP January PPI Core Output 0.3% vs 0.4% (MoM)
09:30 GBP January PPI Core Output 2.6% vs 2.6% (YoY)
09:30 GBP January PPI Input 0.8% vs 0.5% (MoM)
09:30 GBP January PPI Input 14.6% vs 11.2% (YoY)
09:30 GBP January PPI Output 0.4% vs 0.5% (MoM)
09:30 GBP January PPI Output 5.1% vs 5% (YoY)
09:30 GBP December Trade Balance �-7.35B vs �-7.38B
09:30 CAD December Trade Balance non-EU �-4.4B vs �-4.44B
13:30 GBP New Housing Price Index 0.3% vs 0.5%
00:01 January BRC Retail Sales Monitor 0.3%
The Risk Today:
EurUsd Dropped by 2.01% last week at 1.4504 having posted 1.4440 low. Medium term trading range is now 1.4366 � 1.4952. Market traded as low as 1.4940 on Wednesday. Market is turning over 1.4500 pivot support, where below it, market might look down for 1.4280 next support after trendline support holding 1.4311 December low. Initial resistance holds 1.4652 yesterday high.
GbpUsd Cable lost 0.98% last week in a second consecutive lower market, returning below 1.9590 (38.2% retracement of 1.7049 � 2.1161 advance). Further pressure below 1.9500 might open the door toward 1.9337 January low and 1.9105 (50% retracement of 1.7049 � 2.1162 advance). Return in uptrend might be only confirmed over 2.0000 key level before 2.0100 resistance. Initial resistance holds 1.9590 former support.
UsdJpy It remains weak below 108, having tested 104.97 low 23rd January and 105.77 low in February. Initial resistance holds 107.89 and strong resistance holds 110.10 mid January double top ahead of 111.92 early January high. Pressure will be relieved over 108. Meanwhile, current trend may look for 106 support and next 104.97 support ahead of 104.20 trendline support.
UsdChf Posted a 2 � week high Thursday at 1.1104. Initial resistance holds 1.1123 late January high. Market might look for 1.1130 (38.2% of 1.1603 � 1.0838 decline). Early January double top 1.1191 marks strong resistance. Initial support holds 1.0933 Thursday low, 2 figures away from previous week low 1.0732.
Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland