Dollar rallied to a 6-month high on raising concerns of recession in euro-zone

The Dollar has extended its rally of the past month, touching a 2008 high against a basket of currencies on the view that economic weakness, once US, is spreading globally. A jump in US consumer confidence in August to 56.9 vs 51.9 added to the Dollar advance. US housing data had little impact on Dollar trading. And investor did focus later on the release of the minutes of the last FOMC meeting. The Ifo German business climate index for August fell more than expected to a three-year low of 94.8 vs 97.5, while German GDP contracted in Q2 for the first time since 2004. Ongoing worries that other countries are vulnerable to US economic weakness and views about the health of the financial services industry prompted investors to bail out of risky trades in higher-yielding currencies such as Australian and New Zealand Dollars.

News and Events:


The Dollar rallied to a 6-month high against the Euro on Tuesday following weak German data that raised concerns of recession in the euro zone and raised expectations of interest rate cuts. The Dollar has extended its rally of the past month, touching a 2008 high against a basket of currencies on the view that economic weakness, once US, is spreading globally.

The Ifo German business climate index for August fell more than expected to a three-year low of 94.8 vs 97.5, while German GDP contracted in Q2 for the first time since 2004. German consumer sentiment also worsened more than expected, hitting a 5-year low.

A jump in US consumer confidence in August to 56.9 vs 51.9 added to the Dollar advance. US housing data had little impact on Dollar trading. And investor did focus later on the release of the minutes of the last FOMC meeting.

EurUsd was down 0.53% to 1.4647 after falling to 1.4571 intraday low after the Ifo data, it’s weakest since mid-February. EurUsd is down about 5.5% this month and may be set for the biggest monthly fall since its 1999 launch, on the growing view that a weak euro zone economy will prompt the European Central Bank to cut rates despite high inflation. UsdChf rose 0.24% to 1.1001 after hitting 1.1087 intraday and 6-month high. GbpUsd fell 0.49% to 1.8392 after hitting 1.8330 intraday low. UsdJpy was up 0.26% at 109.57.

Ongoing worries that other countries are vulnerable to US economic weakness and views about the health of the financial services industry prompted investors to bail out of risky trades in higher-yielding currencies such as Australian and New Zealand Dollars. AudUsd dropped to an 11-month low of 0.8494. NzdUsd traded down 0.32% to 0.6956.






Today's Key Issues (time in GMT):


06:00 EUR July German Import prices 0.5% vs 1.5% (mom)
06:00 EUR July German Import prices 9.3% vs 8.9% (yoy)
07:00 EUR Q2 Spain GDP 0.1% vs 0.3% (qoq)
07:00 EUR Q2 Spain GDP 1.8% vs 2.7% (yoy)
07:00 SEK August Consumer confidence -16.5 vs -18.2 (mom)
07:00 SEK August Manufacturing sentiment -10 (mom)
08:00 NOK June Labor force survey 2.5% vs 2.5%
12:30 USD Durable goods ex-defense 0.2% vs 0.0%
12:30 USD Durable goods ex-transport -0.5% vs 2.0%
12:30 USD Durable goods orders 0.0% vs 0.8%
12:30 USD Non-def cap good ex-aircraft -0.1% vs 1.2%
12:35 USD Fed’s Lockhart speaks on inflation, Georgia University
16:00 USD Midwest manufacturing 106
The Risk Today:

EurUsd:
Market dropped as low as 1.4571 yesterday, 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 6-weeks ago and 1.8330 yesterday low. On the downside, further weakness would open the way down to 1.8091 June 2006 low. On the upside, initial resistance holds 1.8795 last week high. Former support 1.9363 holds also strong resistance. Key level holds 2.0100 resistance.


UsdJpy:
Last 6-weeks recovery pushed the market up to 110.67 high two weeks ago. Further advance would open the way toward 111.92 early January high. On the downside, a return below 108.59 former resistance and 108.14 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 108.14 Thursday low.


UsdChf:
Dollar rose higher against Chf and hit 1.1087 6-months and yesterday high. 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:



By
Jean-Claude Braha
- ACM Advanced Currency Markets, Geneva, Switzerland
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Provided by ACM: http://www.ac-markets.com