Market consensus indicates US rates unchanged after weak economic numbers in April, a slumping housing market and stronger growth elsewhere.
News and Events:
The greenback has been steady ahead of today’s rate decision. Market consensus shows rates unchanged after weak economic numbers from the US in April, a slumping housing market and stronger growth elsewhere. Investors will pay attention to any indication that the Federal Reserve is concerned about the recent growth slump which could lead to rate cuts in the near-term. Downside risk still remains for the Euro if rallies continue to stall at the 1.3550 level.
The Australian dollar has enjoyed two straight days of gains on strong retail sales for March, growth in first quarter sales volumes and higher than expected tax cuts. Investors eye a possible rate hike in the long term to match economic growth. AUDUSD traded to a high of 0.8311 in yesterday’s session.
Today’s most interesting chart is the US versus Hong Kong dollar. Hovering in the top half of the channel, the pair shows signs of technical weakness while trading at 7.8182. Look for a break below 7.8133 (lower trend-line) for a slide to 7.8000 in the near term.
Today’s Key Issues (time in GMT):
06:00 EUR German Trade Balance (MAR) 15.0B vs 14.2B
06:00 EUR German Current Account (MAR) 10.0B vs 8.4B
06:00 EUR German Imports, seas. adjusted (MoM) (MAR) -0.9% vs 5.7%
06:00 EUR German Exports, seas. adjusted (MoM) (MAR) 0.2% vs 1.9%
06:45 EUR French Central Government Budget Balance (euros) (MAR)
07:00 EUR ECB’s Trichet Speaks at Bank Regulators’ Conference in London
09:30 GBP BRC Shop Price Index (MoM) (APR)
09:30 GBP BRC April Shop Price Index (YoY) (APR)
11:00 USD MBA Mortgage Applications (MAY 4)
14:30 USD EIA Crude Oil Stocks (MAY 4)
18:15 USD FOMC Rate Decision 5.25% vs 5.25%
The Risk Today:
EurUsd: Support is now found at 1.3490 as stops were hit as the pair dropped to 1.3515. We are, however, at the lower trend-line, with bullish bias in the market. Look for a bounce back into the channel with initial resistance at 1.3623.
GbpUsd: ahead of the BOE’s rate decision, 2.0076 is the first resistance to signal a move to 2.0134. On the flip side, a close below 1.9845 is bearish and risky at that because the pair remains in a bull trend.
UsdJpy looking to break 120.20 and move above 120.54 to be firmly bullish. However, bears must confirm with a break below 119.06 to signal a move lower.
UsdChf broke out of the major upper trend-line and found initial resistance at 1.2192 with next resistance at 1.2287. For the bears, look for a break below yesterday’s low of 1.2104 to be short with a target of 1.2000.
Resistance and Support:
By James Brandt - ACM Advanced Currency Markets, Geneva, Switzerland