Dollar extends gain on Fed Term Securities Lending Facility auction results.

The Dollar rose on Thursday on views liquidity conditions for banks were not as dire as initially thought after a tepid Federal Reserve auction to swap poor-performing investments. Analysts said the Dollar also got a lift from investors covering short positions after a recent sell-off and warned that underlying sentiment on the Dollar remained bearish. Analysts said investors were merely pausing before driving the Euro to fresh all-time highs against the Dollar, with US economic data continuing to point to further Federal Reserve interest rate cuts. They also said reports showing the US economy grew in line with market expectations in the fourth quarter, while jobless claims declined last week, had minimal impact on the market. In its final estimate of fourth-quarter Gross Domestic Product, the Commerce Department said economic growth slowed to an annual pace of 0.6% from a robust 4.9% in the previous three months. Thursday's data also showed the number of US workers filing new claims for jobless benefits fell by 9,000 last week.


News and Events:
The Dollar rose on Thursday on views liquidity conditions for banks were not as dire as initially thought after a tepid Federal Reserve auction to swap poor-performing investments. Analysts said the Dollar also got a lift from investors covering short positions after a recent sell-off and warned that underlying sentiment on the Dollar remained bearish. Results from the Fed's $75 billion Term Securities Lending Facility, or TSLF, showed Primary Dealers submitted just $86.1 billion of bids for the Fed's offering of low-risk US government securities for 28 days. The TSLF is part of a liquidity campaign by the central bank to help the distressed financial sector, which has suffered more than $120 billion in write-downs tied to sub-prime mortgage investments. But details of discount window borrowing for the week ending Wednesday showed primary dealers more than doubled their direct borrowing from the Fed. EurUsd was flat yesterday at 1.5812, less than 1 cent below last week's record highs above 1.5904. The Euro is still up more than 8% this quarter, remaining on track for its strongest quarterly performance since late 2004. UsdJpy briefly rose above 100 shortly after the announcement of the TSLF auction results. It was last trading at 99.54 up 0.38%. UsdChf was flat at 0.9923. Analysts said investors were merely pausing before driving the Euro to fresh all-time highs against the Dollar, with US economic data continuing to point to further Federal Reserve interest rate cuts. They also said reports showing the US economy grew in line with market expectations in the fourth quarter, while jobless claims declined last week, had minimal impact on the market. In its final estimate of fourth-quarter Gross Domestic Product, the Commerce Department said economic growth slowed to an annual pace of 0.6% from a robust 4.9% in the previous three months. The number was unchanged from the government's previous estimate. Thursday's data also showed the number of US workers filing new claims for jobless benefits fell by 9,000 last week, although a more reliable gauge of lay-off trends rose to its highest in more than two years. The Federal Reserve has slashed the benchmark federal funds rate to 2.25 percent from 5.25 percent just over six months ago, while the European Central Bank has kept its refinancing rate at 4 percent.




Today's Key Issues (time in GMT):

09:30 GBP Q4 Current account £-8.456B vs -20.04B
09:30 GBP Q4 GDP final 0.6% vs 0.6% (QoQ)
09:30 GBP Q4 GDP final 2.8% vs 2.9% (YoY)
10:30 CHF March KOF indicator 1.58 vs 1.65
12:30 USD February Consumption, adjusted 0.1% vs 0.4%
12:30 USD February Core PCE price index 0.1% vs 0.3% (MoM)
12:30 USD February personal income 0.3% vs 0.3%
13:55 USD March University of Michigan condition final 84 vs 83.8
13:55 USD March University of Michigan expectations 61.4 vs 62.4
13:55 USD March University of Michigan sentiment 70 vs 70.8
14:30 CAD January Budget Balance previously CAD$ 2.67B



The Risk Today:

EurUsd Euro posted a new all-time high 1.5904 last week, confirming medium term trading range 1.5400 – 1.6000. Initial support hold 1.5528 (23.6% retracement of 1.4311-1.5904 advance). Psychological 1.5000 level marks strong key support before 1.4500 pivot point. Initial resistance hold 1.6000 key level. Initial support hold 1.5341 Monday low.

GbpUsd Cable advanced as high as 2.0398 two weeks ago, 2 ½ month high. It reversed last week below 2.0000 further to profit taking. Actual trading range is 1.9700 – 2.0400. Psychological 2.0100 and 2.0000 supports are major pivot points. Renewed pressure may open the way down to 1.9337 January low and 1.9105 (50% retracement of 1.7049 – 2.1162 advance). Reconsolidation over 2.0000 may open the way up 2.0200.

UsdJpy It rebounded from 95.74 last week low. Last week marks the end of a 4-week downtrend. 100 Pivot marks resistance. Bottom support holds 95. On the Upside, only a confirmation over 100 may open the way up to 110.10 strong (Trendline) resistance and mid January double top ahead of 111.92 early January high. Strong support holds 95.74 last week low. Minor resistance holds 101.04.

UsdChf Market remains weak below 1.0200, having traded below 1.0000 psychological level last week. Strong support holds 0.9639 last Monday low. Uptrend would only return over 1.0200 resistances. Early January double top 1.1191 marks strong resistance.


Resistance and Support:




By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland