The Dollar fell against the Euro on Thursday as a strong performance on Wall Street helped ease extreme risk aversion, reducing demand for safety. The Yen tumbled against the Dollar, the Euro and higher-yielding currencies, reversing sharp gains in the previous session. Renewed speculation of intervention by Japanese authorities to stem the currency’s rise added to pressure. Sterling came under pressure after the Bank of England said on Wednesday that the British economy would shrink sharply next year, bolstering expectations of further rate cuts. Risk aversion was heightened on Wednesday after the US Treasury backed away from using its $700 billion financial bailout to buy bad mortgages, adding to fears about the US and global economy. Despite Thursday’s pullback, analysts expect the Dollar and the Yen to stay well-bid as persistent worries over the global economic outlook will likely continue to drive investors away from risky assets and into the safety of the two currencies.
[B]News and Events:
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The Dollar fell against the Euro on Thursday as a strong performance on Wall Street helped ease extreme risk aversion, reducing demand for safety. The Yen tumbled against the Dollar, the Euro and higher-yielding currencies, reversing sharp gains in the previous session. Renewed speculation of intervention by Japanese authorities to stem the currency’s rise added to pressure.
Risk aversion made the Dollar briefly trim its losses after US government data showed initial jobless claims rose last week to the highest level since the weeks following the September 11, 2001 attacks. Sterling came under pressure after the Bank of England said on Wednesday that the British economy would shrink sharply next year, bolstering expectations of further rate cuts. Risk aversion was heightened on Wednesday after the US Treasury backed away from using its $700 billion financial bailout to buy bad mortgages, adding to fears about the US and global economy.
Yesterday, EurUsd was up 2.64% at 1.2787 recovering from the 2-week low of 1.2389 hit earlier. UsdJpy was up 2.95% at 97.61. EurJpy rose 5.67% at 124.81. EurGbp rose 2.55% at 0.8580 having hit 0.8663 intraday high. GbpUsd was nearly unchanged +0.11 at 1.4903 after fallen to a 6 �-year low of 1.4558. UsdChf was only down 0.12% at 1.1859 having hit 1.2002 intraday high.
Despite Thursday’s pullback, analysts expect the Dollar and the Yen to stay well-bid as persistent worries over the global economic outlook will likely continue to drive investors away from risky assets and into the safety of the two currencies.
Recession became a reality in Germany, where GDP contracted by 0.5% in Q3, tipping Europe’s biggest economy into recession for the first time in five years. The Organization for Economic Cooperation (OECD) cut its economic forecasts for the United States, Japan and euro zone, and said the 30-nation OECD area appeared to have entered recession. The projections were released before an emergency meeting in Washington this weekend of leaders from the Group of 20 developed and developing countries.
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Today’s Key Issues (time in GMT):[/B]
07:00 EUR October German CPI final -0.2% vs -0.1% (mom)
07:00 EUR October German CPI final 2.4% vs 2.9% (yoy)
07:00 EUR October German HICP final -0.3% vs -0.1% (mom)
07:00 EUR October German CPI final 2.5% vs 3% (yoy)
07:50 EUR Q3 French GDP Preliminary 0.1% vs -0.3% (qoq)
08:00 EUR Q3 Spain Estimated GDP -0.2% vs 0.1% (qoq)
08:00 EUR Q3 Spain Estimated GDP 0.9% vs 1.8% (yoy)
10:00 EUR Q3 Euro zone GDP flash estimate -0.2% vs -0.2% (qoq)
10:00 EUR Q3 Euro zone GDP flash estimate 0.7% vs 1.4% (yoy)
10:00 EUR October Euro zone Inflation ex food & energy 0.3% vs 0.3% (mom)
10:00 EUR October Euro zone Inflation ex food & energy 2.3% vs 2.5% (yoy)
10:00 EUR October Euro zone Inflation final 0.1% vs 0.2% (mom)
10:00 EUR October Euro zone Inflation final 3.2% vs 3.6% (yoy)
13:30 USD October Export prices -1% vs -1%
13:30 USD October Import prices -4.2% vs -3%
13:30 USD October Retail sales ex-autos -1.2% vs -0.6% (mom)
13:30 USD October Retail sales -2% vs -1.2% (mom)
13:30 CAD September Manufacturing sales -1.5% vs -3.7%
13:30 USD Fed�s Bernanke speaks at banking conference, Frankfurt
14:55 USD November University of Michigan Conditions 55 vs 58.4
14:55 USD November University of Michigan Expectations 56 vs 57
14:55 USD November University of Michigan Preliminary 56 vs 57.6
15:00 USD September Business Inventories 0% vs 0.3%
17:30 USD Fed�s Pianalto speaks on the Feds�s role in the credit crisis
[B]The Risk Today: [/B]
[B]EurUsd:[/B] Market dropped as low as 1.2330 on October 28th and sharply rebounded to 1.3298 high Thursday last week. This shows actual trading range 1.2330 � 1.3298. On the downside, renewed weakness will open the way down to trendline support 1.2208. Next long-term support holds 1.1640 November 2005 low. Further support holds 1.0739 September 2003 low. On the upside, only a return over 1.4000 (former trendline support) and 1.5000 will release actual pressure and may put key resistance 1.6000 into focus. Resistance holds 1.4002 former trendline support. Initial resistance holds 1.3769 14th October high.
[B]GbpUsd:[/B] Market dropped as low as 1.4558 yesterday in current 3-month downtrend. It also posted 1.6673 high last week. Strong supports hold 1.4560 trendline and 1.3682 March 2001 low. On the upside, strong resistance holds 1.6673 last weeks high ahead of 1.7144 (38.2% retracement of 2.0158 � 1.5265 3-month drop). Further resistance holds 1.7744 (50% retracement).
[B]UsdJpy:[/B] Market has been holding slightly below 99.80 September-October trendline resistance in the latest weeks and drop to 94.47 yesterday. Initial resistance holds 99.48 Monday high. On the upside, only a recovery over 103 upper trendline and 105 pivot point will put focus again on 108 and 110.67 15th August high. Strong resistance holds 100 pivot point. Staying in the current downtrend might open the way down to 79.70 April 1995 low. Strong resistance holds 90.91 24th October low.
[B]UsdChf:[/B] Market hit 1.2002 new 1-year high this morning. Further strength may open the way over 1.2153 trendline resistance. Next resistance holds 1.2463. On the downside, renewed weakness below 1.1605 initial support and 1.1203 30th October low would undermine the current uptrend and reverse through 1.0692 22nd September low and down to 1.0500 and 1.0375. Such a move may look for 1.0013 15th July low in front of 0.9637 17th March low.
[B]Resistance and Support:
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By[B] Jean-Claude Braha [/B]- ACM Advanced Currency Markets, Geneva, Switzerland