The Dollar rallied against most currencies on Thursday, buoyed by demand from US corporations seeking to square their books by month-end and those scrambling for cash to cover a seasonally thin year-end period. Analysts said US data on jobless claims and New Home Sales for October did little to alter expectations that the Federal Reserve will reduce interest rates by 0.25 to 4.25% next month after it cut them by a cumulative 0.75 since September to cushion the economy from a severe housing slump and credit market turbulence. Fed Chairman Bernanke said late on Thursday a resurgence in financial strains in recent weeks had dimmed the outlook for the US economy, signaling an openness to again lowering interest rates.
News and Events:
The Dollar rallied against most currencies on Thursday, buoyed by demand from US corporations seeking to square their books by month-end and those scrambling for cash to cover a seasonally thin year-end period. The Yen also rallied broadly after steep losses in the previous two sessions on worries about the state of global credit markets. Analysts said US data on jobless claims and New Home Sales for October did little to alter expectations that the Federal Reserve will reduce interest rates by 0.25 to 4.25% next month after it cut them by a cumulative 0.75 since September to cushion the economy from a severe housing slump and credit market turbulence. Some are even predicting the Fed will ease by 0.50. But expectations of a rate cut failed to stem the rally in the Dollar, as markets remained focus on the ongoing global credit crunch and the need to stay liquid. Some analysts have suggested rate cuts could help the dollar indirectly as they would help avoid a US recession. Lower rates typically make Dollar-denominated securities less attractive, reducing demand for the currency. However, given concerns about persistent weakness in the US housing and credit markets, signs that the Fed will continue to act to help the US economy should attract investment inflows. EurUsd was down 0.55% at 1.4758. GbpUsd dropped by 0.77% to 2.0625. UsdJpy was little changed +0.09% to 110.06. Traders said it was being pressured by trading in EurJpy which was down 0.4% at 162.51. Fed Chairman Bernanke said late on Thursday a resurgence in financial strains in recent weeks had dimmed the outlook for the US economy, signaling an openness to again lowering interest rates.
Today’s Key Issues (time in GMT):
10:00 EUR November Euro zone CPI estimate 2.7% vs 2.6% (YoY)
10:00 EUR 3Q Euro zone GDP 0.7% vs 0.7% (QoQ)
10:00 EUR 3Q Euro zone GDP 0.7% vs 0.7% (QoQ)
10:00 EUR November Business Climate Indicator 0.75 vs 0.87
10:00 EUR November Euro zone Consumer Confidence -7 vs -6
10:00 EUR November Euro zone Economic Confidence 105 vs 105.9
10:00 EUR November Euro zone Industry Confidence 1 vs 2
10:00 EUR November Euro zone Services Confidence 17 vs 18
10:30 GBP November GfK Consumer Confidence survey -9 vs -8
13:30 CAD September Gross Domestic Product 0.1% vs 0.2%
13:30 CAD Quarterly GDP annualized 2.1% vs 3.4%
13:30 USD October Personal Income 0.4% vs 0.3%
13:30 USD October Personal Spending 0.3% vs 0.3%
13:30 USD October PCE Deflator 2.8% vs 2.4% (YoY)
13:30 USD October PCE Core 0.2% vs 0.2% (MoM)
13:30 USD October PCE Core 1.8% vs 1.8% (YoY)
14:45 USD November Chicago Purchasing Manager 50.5 vs 49.7
15:00 USD October Construction Spending -0.3% vs 0.3% (MoM)
15:00 USD November NAPM-Milwaukee 63
The Risk Today:
EurUsd Euro remains in a positive trend but pulling back from last Friday last record high 1.4967. It might return down to two weeks ago support on 1.4520. For now, it is currently consolidating around 1.4800. 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 1.4723 yesterday low.
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 sharp 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 three 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 confirmation over 109 to focus further on 114 and 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 and posted a third consecutive positive session. 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 Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland