Trichet comments from the G10 meeting strengthened the EUR against the majors. Contrasting comments from Japan's Fukui sparked a rally in EYRJPY. USD little lower on Fridays weak housing figures.
MAJOR HEADLINES – PREVIOUS SESSION
EUR
The outcome of the G10 meeting in Sydney was comments from Trichet, that "Strong Vigilance" still is needed to keep the European inflation in check as global growth in 2007, while slowing from this year, will "remain very, very dynamic." As BoJ Governor Fukui of Japan signalled the opposite in Japan a rally was sparked in EURJPY touching 2006 highs at 151.66. We still believe to see more upside and that 150.75 will act as a new key support. Higher-than-expected German PPI supported the increase in the EUR, that rose against most of the majors.
Apart from the moves in EUR and JPY the other pairs were range bound as data were light. At 15 GMT we have the US Leading Indicators for October as the most important figure of the day. Tha market expects a 0.2 pct. rise vs. the 0.1 pct. increase in September. We're not expecting the figures to make a big impact in the markets, but as it's the only figure out - it will be paid some attention.
Notes from last week.
The FOMC minutes gave USD/Majors not much to go by short term. FOMC showed incoming data was broadly as anticipated. Housing to remain a substantial drag but was not spilling into consumer spending with labor market remained tight. So the take is that, it looks like the FOMC is still a bit more concerned about inflation being to high rather than growth too low. US CPI should be the focus for EURUSD for the remainder of the week. A surprise to the upside meaning 0.3% should lead to break of 1.2765 and a reading of 0.1% should see the pair rally for a test of at least 1.2855.
UK
The retail sales for October is the biggest monthly gain since November 2005. This number is consistent with the MPC's expectation that consumer spending growth will remain firm. But GBPUSD remain vulnerable intra-day as market awaits US CPI which could send the pair a leg lower. We look to sell the pair if it breaks 1.8850 post US figures.
FX Orderbook
Euro/US Dollar
EURUSD (1.2834 @ 14:28 GMT)
Support:
1. 1.2460 daily base which coincides with 1.2465 38% retracement
2. 1.2320 double top form march 2006
3. 1.2260 bull trend line from March 2006
4. 1.1635 38% retracement (0.8350-1.3667), also low from 2005.
Resistance:
1. 1.2940 old top from August 2006.
2. 1.2980 long term inverse head-and-shoulder target.
3. 1.3175 upper bull trend channel from March 2006.
Resist.
1.2976
1.2893
1.2859
1.2834
1.2777
1.2728
1.2646
Support
British Pound/US Dollar
GBPUSD (1.8980 @ 14:28 GMT)
Support:
1. 1.8520 lower end of the bear channel from early August 2006.
2. 1.8500 daily base support.
3. 1.8325 wave high from March 2005.
4. 1.8090 wave support from July 2006.
5. 1.7330 long term bull trend support from 2001.
Resistance:
1. 1.9145 Old top from August.
2. 1.9215 old top from April 2005.
3. 1.9325 wave high from March 2005.
4. 1.9550 highs from december 2004.
Resist.
1.9179
1.9047
1.8995
1.8980
1.8863
1.8784
1.8652
Support
US Dollar/Japanese Yen
USDJPY (118.03 @ 14:28 GMT)
Support:
1. 116.50 wave low from late October.
2. 115.55 wave low from April (key level as it would take our weeky lower high/higher high, which would confirm accelerated downside)
3. 113.35 weekly base support.
4. 109.00 key support form confirmation of a monthly downward trend.
Resistance:
1. 119.20 choppy range base from early October.
2. 119.90 old top from mid-October.
3. 121.40 old top from December 2005.
4. 1250.00 50% retracement (form 147.63-101.67).
Resist.
119.79
118.85
118.29
118.03
117.35
116.96
116.02
Support
