Dollar fell in volatile market ahead of ECB rate outlook

The Dollar fell against the Euro and was little changed against the Yen on Tuesday in a volatile session as investors debated the outlook for the US economy while anticipating a rate hike from the European Central Bank later this week. US stocks retraced earlier losses after General Motors reported stronger-than-expected June sales, keeping the Dollar off session lows. The Institute for Supply Management said its index of national factory activity rose in June to 50.2 from 49.6 in May after four straight months of contraction. Euro-zone manufacturing activity contracted for the first time in 3-year in June and output prices matched April's year high. But analysts said Tuesday's data will not prevent the ECB raising rates.

News and Events:


The Dollar fell against the Euro and was little changed against the Yen on Tuesday in a volatile session as investors debated the outlook for the US economy while anticipating a rate hike from the European Central Bank later this week.

The ECB is widely expected to raise interest rates by a 25bp to 4.25% on Thursday, bolstering demand for Euro-denominated assets. Markets have begun to take the view that the Federal Reserve has little scope to tighten U.S. monetary policy aggressively to fight inflation given the sluggish economy.

US stocks retraced earlier losses after General Motors reported stronger-than-expected June sales, keeping the Dollar off session lows. A rise in US factory activity also helped the Dollar. The Institute for Supply Management said its index of national factory activity rose in June to 50.2 from 49.6 in May after four straight months of contraction. In Europe, data showed euro zone manufacturing activity contracted for the first time in three years in June and output prices matched April's year high. But analysts said Tuesday's data will not prevent the ECB raising rates.

Yesterday, EurUsd rose 0.2% at 1.5791. UsdJpy traded 0.12% up at 106.18, well off the session low of 105.23. EurJpy gained 0.33% to 167.65. UsdChf was unchanged at 1.0208 recovering from intraday 1.0139 low. GbpUsd rose 0.06% to 1.9943 retracing from intraday 2.0007 high.






Today's Key Issues (time in GMT):


09:00 EUR June Euro-zone Producer Prices 0.9% vs 0.8% (MoM)
09:00 EUR June Euro-zone Producer Prices 6.7% vs 6.1% (YoY)
12:15 USD June ADP National Employment -20k vs 40k
12:30 CAD April GDP 0.3% vs -0.2% (MoM)
14:00 USD May Durable goods orders (revision) 0% vs 0%
14:00 USD May Factory orders 0.4% vs 1.1%
14:00 DKK June Currency reserves 161.9B v 161.9B
The Risk Today:

EurUsd:
Market is testing top of the current 1.5400-1.5800 range. Yesterday high 1.5827 is putting further upside in sight. Initial resistance holds 1.5844 June 9th high. A break up there would reopen the way up to 1.6000 Pivot point resistance ahead of key resistance 1.6200 market target. On the downtrend, weakness below 1.5400 will put the current light 2-month uptrend on hold. This may open way down to 1.5000 key level. Support holds 1.5304 13th June low.


GbpUsd:
Cable hit 2.0000 psychological level. But reversed gains and closed at 1.9943. On the upside, psychological 2.0000 level stays into focus. On the downside, a reversal below 1.9600 might bring again focus on 1.9337 January low and 1.9105 (50% retracement of 1.7049 – 2.1162 advance). Initial support holds 1.9800 former range resistance. Strong support holds 1.9363 20th February and 14th May low.


UsdJpy:
Market broke down lower 3-month trendline at 106.30. Current 3-month uptrend failed to overtop 108.59 16th June high. More profit taking would bring the market lower than 105 and maybe back to 100 – 104 consolidation trading range. Initial support hold 105.86 Friday low. Renewed advance to mid-June 108.59 would put 110.10 strong resistance (Trendline) into focus and mid January double top ahead of 111.92 early January high.


UsdChf:
Market couldn’t hold 1.0200 lower support last Friday. Strong support holds 1.0148 June 9th low. Initial support holds 1.0166 Friday low. Further weakness may open the way toward 0.9637 17th March low. June 13th 1.0541 high holds initial resistance. A return over 1.0200 would bring back consolidation 1.0200 – 1.0600 range.



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