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Forex − Market is looking for Euro−zone and Britain for more evidence of slowing growth

Thu, Aug 21 2008, 10:32 GMT
by Peter Rosentreich

ACM - Advanced Currency Markets

Forex News and Events:

The Dollar rose on Wednesday, reversing a two-day losing markets, supported by views that slowing global economic growth would prompt a wave of interest rate cuts outside the United States. It gained in quiet trade despite a rebound in Crude Oil prices to $115.51 a barrel.

Data from Europe and Japan are increasingly pointing to deterioration in the growth outlook for those regions, leading investors to anticipate early rate cuts from both the European Central Bank and the Bank of England. Such a step would shift the yield appeal in the Dollar's favor, with the Federal Reserve expected to start raising interest rates next year.

Data on Wednesday showed that euro zone construction shrank by 0.6% in June from May, a factor that was also weighing on the Euro against both the Dollar and Yen. At the same time, Japan's all-industries index, which covers a broad range of economic activity including the tertiary activity index, fell 0.9% in June.

There are worries that US home finance providers Fannie Mae and Freddie Mac may need a government bailout.

EurUsd dropped to an intraday low of 1.4672 and last traded down 0.28% at 1.4752. UsdJpy was fairly unchanged at 109.71 after posting a 110.28 intraday high. UsdChf rose 0.65% to 1.0981 after hitting 1.1041 6-months high. GbpUsd was 0.26% lower at 1.8630.

Euro zone PMI and UK retail sales data on Thursday will likely provide more evidence of slowing growth in the euro area and Britain, analysts said.

Today's Key Issues (time in GMT):

06:15 CHF July Trade 2369m vs 2374.2m
07:15 CHF July Producer Import prices 0.5% vs 0.6% (mom)
07:15 CHF July Producer Import prices 4.9% vs 4.5% (yoy)
08:00 EUR August Euro zone RBS/Markit Comp Flash PMI 47.7 vs 47.8
08:00 EUR August Euro zone RBS/Markit Mfg Flash PMI 47 vs 47.4
08:00 EUR August Euro zone RBS/Markit Serv Flash PMI 48 vs 48.3
08:30 GBP July Retail Sales -0.3% vs -3.9% (mom)
08:30 GBP July Retail Sales 1.7% vs 2.2% (yoy)
09:00 CHF August ZEW Investor sentiment -76.9
11:00 CAD July CPI BoC Core 0.2% vs 0.1% (mom)
11:00 CAD July CPI BoC Core 1.6% vs 1.5% (yoy)
11:00 CAD July CPI inflation 0.3% vs 0.7% (mom)
11:00 CAD July CPI inflation 3.4% vs 3.1% (yoy)
12:30 USD weekly Initial claims 443k vs 450k
14:00 USD Lead indicators -0.2% vs -0.1%
14:00 USD Phil Fed business index -14 vs -16.3
00:00 JPY August Bank of Japan rate decision 0.5% vs 0.5%

The Risk Today:

EurUsd Market dropped as low as 1.4631 on Tuesday, new initial support. Further weakness will put the focus on strong support 1.4366 22nd January low. On the upside, only a return over 1.5000 and 1.5500 will release actual pressure and put key initial resistance 1.6000 into focus. Still a break up there would open the way to Trendline resistance 1.6200.

GbpUsd Cable hit 2.0158 high 5-weeks ago and 1.8513 low on Friday. Market is now consolidating in 1.8513-1.8723 range. On the downside, recent market break below 1.9105 former support (50% retracement of 1.7049 – 2.1162 advance) looks still strong. Initial support holds 1.8513 Friday low. On the upside, former support 1.9363 holds also strong resistance. Key level holds 2.0100 resistance.

UsdJpy Last 5-weeks recovery pushed the market up to 110.67 high last week. Further advance would open the way toward 111.92 early January high. On the downside, a return below 108.59 former resistance and 108.37 last week low will undermine the current advance. Profit taking might bring back down to 105 level and may open the way toward 102.73 support and 100 pivot point. Initial support holds 108.37 last week low.

UsdChf Continuous Dollar strength pushed over 1.0800 last week and hit 1.1041 6-months high yesterday. Initial resistance holds 1.1107 13th February high. Strong resistance holds 1.1593 December 2007 high. On the downside, initial support holds 1.0863. Only renewed weakness below 1.0500 and 1.0375 would retest the 1.0000 pivot point and may open the way toward 0.9637 17th March low.

Resistance and Support:

Published on  Thu, Aug 21 2008, 10:38 GMT