Dollar trades lower ahead of Central Bank Meetings

With soft payrolls data and Sarkozy’s win, the Euro is still up. April non-farm payrolls expanded by 88k, well below the 100k estimate, the slowest growth in two years. The unemployment rate increased by 0.1% to 4.5% (expected). The Euro trend is still up.

News and Events:
This week is key to market expectations on US interest rates and the direction of the dollar. The greenback remains under pressure as other economies grow at a faster pace than the US. The Fed is rumored to keep rates unchanged, for now. Investors will be looking for key words that may confirm rate cuts in the future. As we stand right now, traders are still long Euro.

The Mexican Peso has risen in value lately on rising consensus that the economy has moved out of deceleration. Tax and internal reform and improved pension packages are highlights from President Calderon’s government.

Today’s most interesting chart is the Dollar/Swiss. The pair has bounced off both trend-lines into a triangle formation, signaling a major break-out. Furthermore, we see a clear head and shoulders pattern and major divergence between price and RSI (14). This pair is a buy and hold.

Today’s Key Issues (time in GMT):

10:00 EUR German Industrial Production, seasonally adjusted (MoM) (MAR) 0.0% vs 0.9%
10:00 EUR German Industrial Production, n.s.a. working days adjusted (YoY) (MAR) 8.2% vs 7.7%

11:45 USD ICSC - UBS Survey (5-May)

12:15 CAD Housing Starts (APR) 215.0K vs 214.0K

12:55 USD Redbook (5-May)

14:00 USD Wholesale Sales (MAR) 0.8% vs 1.2%
14:00 USD Wholesale Inventories (MAR) 0.4% vs 0.5%

21:00 USD ABC Consumer Confidence (6-MAY)

The Risk Today:

EurUsd: A break above the 1.3629 resistance would signal a go ahead back to 1.3683. The pair is well supported at 1.3540.

GbpUsd: 2.0075 is the next resistance; look for the cable to break that to see a continued bull trend with a first target at the high of 2.0134. Any move below 1.9845 is bearish. The trend, however, is still up.

UsdJpy has hit its lower trend line in early trading this morning. Bulls will buy on yesterdays high: 120.19 for a move to 120.54. Bears will wait for a daily close below 119.69 to test a run down to 118.90.

UsdChf finds support at 1.2069 and stronger support at 1.1995. However, bulls might have the upper hand on this one, looking to break through the 1.2191 resistance for a target to 1.2288.


Resistance and Support:

By James Brandt - ACM Advanced Currency Markets, Geneva, Switzerland