Signs of economic slowdown in Europe, Asia and Australia reduced outlooks for higher interest rates and boosted demand for Dollar

Signs of economic slowdown in Europe, Asia and Australia reduced outlooks for higher interest rates and boosted demand for Dollar


The Dollar rallied to a five-and-a-half month high against the Euro on Monday, boosted by another drop in Crude Oil prices and speculation that the US economy slowdown was spreading worldwide. Mounting signs of economic difficulties in Europe, Asia and Australia have diminished prospects of higher interest rates outside the United States, bolstering demand for the Dollar. The euro briefly recouped some of its losses after European Central Bank council member Klaus Liebscher warned that policy-makers remained focused on taming high inflation. Liebscher told Market News International that inflation risks remained to the upside in the medium term and that there is no room for "complacency" on euro zone interest rates and inflation. Declining Oil prices helped ease worries about the impact of higher energy costs on the US economy and also helped boost demand for the greenback.
News and Events:


The Dollar rallied to a five-and-a-half month high against the Euro on Monday, boosted by another drop in Crude Oil prices and speculation that the US economy slowdown was spreading worldwide. EurUsd, which last week suffered its biggest weekly fall since its 1999 inception, briefly fell below the 1.4900 level on Monday.

Mounting signs of economic difficulties in Europe, Asia and Australia have diminished prospects of higher interest rates outside the United States, bolstering demand for the Dollar. Declining Oil prices helped ease worries about the impact of higher energy costs on the US economy and also helped boost demand for the greenback.

Yesterday, EurUsd was 0.65% lower at 1.4910, after hitting 1.4881 lowest trading level since February 26th. UsdJpy was fairly unchanged at 110.16 after trading as high as 110.40. UsdChf rose 0.39% to 1.0864 rebounding from intraday 1.0742 low. GbpUsd dropped 0.47% to 1.9114 reversing from intraday 1.9256 high.

The euro briefly recouped some of its losses after European Central Bank council member Klaus Liebscher warned that policy-makers remained focused on taming high inflation. Liebscher told Market News International that inflation risks remained to the upside in the medium term and that there is no room for "complacency" on euro zone interest rates and inflation.

Demand for the Swiss franc rose on news of the fighting between Russia and Georgia. EurChf traded near a three-week low of 1.6168 and ended down 0.26% at 1.6198.





Today's Key Issues (time in GMT):


06:45 EUR July French CPI (EU norm) final -0.3% vs 0.4% (mom)
06:45 EUR July French CPI (EU norm) final 4%% vs 4% (yoy)
06:45 EUR June Current account -€4.4b vs -€2.5b
06:45 EUR July Inflation ex tobacco 3.6 vs 3.5
08:30 GBP July CPI -0.3% vs 0.7% (mom)
08:30 GBP July CPI 4.1% vs 3.8% (yoy)
08:30 GBP July RPI -0.4% vs 0.8% (mom)
08:30 GBP July RPI 4.9% vs 4.6% (yoy)
12:30 USD June International trade -$61.5b vs -$59.79b
12:30 CAD June Trade Balance C$5.8b vs C$5.54b
18:00 USD July Federal budget -$88.5b vs -$36.45b
21:00 USD weekly ABC CCI -49 vs -49
23:50 JPY June Current account -67.7% vs -5.9%
23:50 JPY Q2 GDP deflator -1.5% vs -1.5%
23:50 JPY Q2 GDP annualized -2.3% vs -4%
23:50 JPY Q2 GDP -0.6% vs 1%
The Risk Today:

EurUsd:
Market dropped to 1.4881 low on Monday breaking below 1.5304 former strong support from 13th June. Further weakness below 1.5000 will put the focus on 1.4779 26th February low. Strong support holds 1.4685 22nd January low. On the upside, only a return over 1.5500 will release actual pressure and put key initial resistance 1.6000 into focus. A break up there would open the way to Trendline resistance 1.6200.


GbpUsd:
Cable hit 2.0158 high 4-weeks ago and 1.9067 low last week. Key level holds 2.0100 resistance. On the downside, Friday break below on 1.9337 January low support lead to the break of 1.9105 (50% retracement of 1.7049 – 2.1162 advance). Former support 1.9363 holds strong resistance. Initial support holds 1.8970 today low.


UsdJpy:
Last 3-weeks recovery pushed the market up to 110.40 high on Friday. The last break of 108.59 former resistance put focus on 110.10 strong resistance (Trendline). Further advance would open the way toward 111.92 early January high. On the downside, a return below 108.59 former resistance 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.


UsdChf:
Recent Dollar strength pushed over 1.0500 last week and hit 1.0882 high on Monday. Market broke up resistance of the 3-months upper trendline at 1.0766 last week. Initial support holds 1.0500 key level. Renewed weakness below 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