Investors unwinding risks on lower US financial stocks

The Dollar dropped against the Yen on Monday, pressured by sharp losses in US equities as remaining credit worries forced investors to reduce risky trades. Dollar gained against the Euro and Sterling on views that declining growth in Euro-zone and United Kingdom could force their Central Banks to cut benchmark interest rates. Yesterday better-than-expected US existing home sales were little support to the Dollar as even a recovery in Housing market is seen as critical to easing some of the concern on the US economy. On Tuesday, currency investors will look at German Ifo data, US housing, US Consumer Confidence and minutes of last FOMC meeting for clues where the economy and interest rates are headed.

News and Events:


The Dollar dropped against the Yen on Monday, pressured by sharp losses in US equities as remaining credit worries forced investors to reduce risky trades. In a thin market due to UK holiday, trades were focusing on US equities, led by sharp fell in financial stocks. However, Dollar gained against the Euro and Sterling on views that declining growth in Euro-zone and United Kingdom could force their Central Banks to cut benchmark interest rates.

Yesterday better-than-expected US existing home sales were little support to the Dollar as even a recovery in Housing market is seen as critical to easing some of the concern on the US economy.

EurUsd fell 0.43% to 1.4725 after loosing as much as 100pip down to 1.4697 low intraday. UsdChf slide 0.1% to 1.0975 recovering from previous 1.0923 low. UsdJpy fell 0.67% to 109.29 after hitting 109.02 low. GbpUsd lost 0.19% to 1.8482, in a thin market but volatile market posting 1.8590 high and 1.8405 low.

Cable has fallen about 7.2% this month, with slow growth in UK looking as another example of widespread economic weakness outside the US.

On Tuesday, currency investors will look at German Ifo data, US housing, US Consumer Confidence and minutes of last FOMC meeting for clues where the economy and interest rates are headed.






Today's Key Issues (time in GMT):


06:00 EUR Q2 German GDP -0.5% vs -1.5% (qoq)
06:00 EUR Q2 German GDP +3.1% vs +1.8% (yoy)
06:00 EUR September German consumer sentiment 1.5 vs 2.1
07:30 SEK July PPI 0.7% vs 0.5% (mom)
07:30 SEK July PPI 3.3% vs 3% (yoy)
08:00 EUR August Germany Ifo business climate 97.1 vs 97.5
08:00 EUR August Germany Ifo current conditions 104.4 vs 105.7
08:00 EUR August Germany Ifo expectations 90.5 vs 90
14:00 USD consumer confidence 53 vs 51.9
14:00 USD New home sales 530k vs 530k
21:00 USD weekly ABC CCI -48 vs -49
The Risk Today:

EurUsd:
Market dropped as low as 1.4631 last week, 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 1.8504 yesterday low. On the downside, further weakness would open the way down to 1.8395 end July 2006 low and maybe 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 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 108.14 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:
Continuous Dollar strength consolidated over 1.0800 last week and hit 1.1041 6-months high on last Wednesday. 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