Dollar is mixed against US stocks recovery and renewed credit worries.

Lehman Brother cautioned on Monday that accounting changes could force Fannie Mae and Freddie Mac to raise capital at a difficult time. Both Shares plunged, dragging US financial shares and the broader stock market down. The Dollar got some support from comments by San Francisco Federal Reserve Bank President Janet Yellen that inflation was starting to outweigh the risk of a deteriorating US economy. Yellen's remarks indicated that the Fed could be leaning toward raising interest rates. Such a step would help narrow the interest rate differential between the Dollar and the Euro, in the wake of the European Central Bank's 25bp rate hike to 4.25% last Thursday.
News and Events:


The Dollar rose versus the Yen on Monday as US stocks recovered some losses despite renewed fears financial institutions might be forced to write down more mortgage-related assets and raise capital.
Lehman Brother cautioned on Monday that accounting changes could force Fannie Mae and Freddie Mac, the largest providers of funding for US home mortgages, to raise capital at a difficult time. Shares of Fannie Mae and Freddie Mac plunged, dragging US financial shares and the broader stock market down. Stocks later regained some lost ground, pushing the Dollar higher against the Yen.

Instability in the US financial sector could complicate matters for the Federal Reserve, whose recent tough stance on inflation had been interpreted by many market participants as an intention to raise interest rates later this year. Such a step would help narrow the interest rate differential between the Dollar and the Euro, in the wake of the European Central Bank's 25bp rate hike to 4.25% last Thursday.

The Dollar eased against the Euro with an Oil price drop from last week's record peak of 145.85 and an unexpected fall in euro-zone investor morale to a three-year low in July. Yesterday, EurUsd was up 0.19% at 1.5725, recovering from earlier drop as low as 1.5611. UsdJpy rose 0.87% to 107.69, as stocks regained some ground. UsdChf was only 0.05% up at 1.0261 dropping from earlier 1.0343 high. GbpUsd went 0.31% down at 1.9763 after hitting 1.9649 low.

The Dollar got also some support from comments by San Francisco Federal Reserve Bank President Janet Yellen that inflation was starting to outweigh the risk of a deteriorating US economy. Yellen's remarks indicated that the Fed could be leaning toward raising interest rates. Market attention was also focused on the annual summit in Japan of the Group of Eight industrialized nations. G8 leaders aim to present a united front against global inflation, driven by soaring oil and food prices, but analysts say solving the problem will require input from developing as well as developed countries. Investors are also keen to see whether G8 leaders would mention this year's weakness of the U.S. dollar, although many doubt that officials will call for concrete action.





Today's Key Issues (time in GMT):


14:00 USD May Pending Home Sales -2.8% vs 6.3%
14:00 USD May Wholesale inventories 0.7% vs 1.3%
19:00 USD May Consumer Credit $7B vs $9B (MoM)
23:50 JPY May Machinery orders 1.1% vs 5.5%
The Risk Today:

EurUsd:
Market hit 1.5910 high last week but return in consolidation 1.5400-1.5800 range. 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 last week. It did reversed gains ahead of US long weekend down to 1.9826 on Friday. 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). Strong support holds 1.9363 20th February and 14th May low. Initial support holds 1.9649 yesterday low.


UsdJpy:
Market broke last week lower 3-month trendline down to 104.99 low as previous trend 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 106.60 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 hit 1.0112 low last week buy Dollar recovered ahead of 4th July holiday. Strong support holds 1.0148 June 9th low. Further support holds 1.0112 Thursday 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