Dollar rose on Bernanke comments and Crude Oil drop

The Dollar rose on Tuesday as Bernanke said the Fed was considering extending the duration of the central bank's facilities for primary dealers into 2009 calming fresh credit concerns and encouraged investors to snap up US stocks. Markets expectations of tighter US monetary policy by year-end were boosted by Federal Reserve Bank of Richmond President Jeffrey Lacker's comments that withdrawing some of the stimulus as risks to the economy diminished made eminent sense. Interest rate futures have fully priced in a 25bp hike in the fed funds rate by year-end. The benchmark overnight lending rate is currently at 2% after it was slashed by 325bp since September.
News and Events:


The Dollar rose on Tuesday as Bernanke said the Fed was considering extending the duration of the central bank's facilities for primary dealers into 2009 calming fresh credit concerns and encouraged investors to snap up US stocks.

A sharp drop in Crude Oil futures also supported the Dollar. Bernanke's remarks came after renewed credit worries sparked by a Lehman Brothers report that an accounting change could force Fannie Mae and Freddie Mac to raise a combined $75bio in capital. They are the largest providers of funding for US home mortgages. But the Office of Federal Housing Enterprise Oversight said on Tuesday the proposed accounting change should not spur capital changes at the two government-sponsored agencies.

EurUsd fell as low as 1.5636 last traded down 0.37% at 1.5666. UsdJpy rose 0.38% to 107.48. UsdChf gained 0.71% to 1.0336. GbpUsd slid 0.33% to 1.9698.

Those Dollar gains were driven by the surge in US stocks, where key indices climbed by more than 1%. Markets expectations of tighter US monetary policy by year-end were boosted by Federal Reserve Bank of Richmond President Jeffrey Lacker's comments that withdrawing some of the stimulus as risks to the economy diminished made eminent sense.

Interest rate futures have fully priced in a 25bp hike in the fed funds rate by year-end. The benchmark overnight lending rate is currently at 2% after it was slashed by 325bp since September.



Today's Key Issues (time in GMT):


08:30 GBP May Trade Balance -£7.4B vs -£7.59B
08:30 GBP May Trade Balance non-eu -£4.1B vs -£4.18B
09:00 EUR Q1 GDP revised 0.8% vs 0.3% (QoQ)
09:00 EUR Q1 GDP revised 2.2% vs 2.1% (YoY)
12:15 House starts 217k vs 221.3k
23:50 JPY June Corp goods price 0.6% vs 1.1% (MoM)
23:50 JPY June Corp goods price 5.3% vs 4.7% (YoY)
23:50 JPY May Current account NSA -9.7% vs -29.6% (YoY)
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. Strong resistance holds 1.5910 3rd July 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. Strong Support holds 1.5304 13th June low.


GbpUsd:
Cable posted its 5th consecutive down session. On the downside, a return 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 Monday low. Long term trading range support is 1.9400 – 2.0000.


UsdJpy:
Current 3-month up- trend will extend till 108.59 strong resistance and 16th June high. Further advance over 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. Renewed and expected profit taking would bring the market below 105 and maybe back into 100 – 104 consolidation trading range. Strong support holds 105.78 3rd July low.


UsdChf:
Market recovered from last week 1.0112 low. Strong support holds 1.0148 June 9th low. Further support holds 1.0112 Thursday low. Recent confirmation over 1.0200 brought back 1.0200 – 1.0600 consolidation range. Renewed (but unlikely) weakness below 1.0000 pivot point may open the way toward 0.9637 17th March low. June 13th 1.0541 high holds initial resistance.



Resistance and Support:


By
Jean-Claude Braha
- ACM Advanced Currency Markets, Geneva, Switzerland
_____________________________________
Provided by ACM: http://www.ac-markets.com