Dollar was stronger against major currencies after Job and Productivity reports.

The Dollar scaled a one-month peak against a basket of currencies on Wednesday as reports showing robust job growth and productivity gains suggested a milder slowdown in the US economy than many had thought. The surprise jump in the ADP employer services report on private sector employment fanned expectations of an above forecast non-farm payrolls report on Friday, prompting the market to trim back chances of a 0.50% interest rate cut by the Federal Reserve next week. private sector added 189,000 private-sector jobs last month, the ADP report showed, helping to ease some market fears about trouble in global credit markets that had weighed on the greenback in recent sessions. Data on Friday will likely show that US employers, outside the farming sector, added 75,000 jobs last month. Expectations the Bank of England will lower it's main lending rate to 5.5%. But ECB is expected to hold at 4%.


News and Events:
The Dollar scaled a one-month peak against a basket of currencies on Wednesday as reports showing robust job growth and productivity gains suggested a milder slowdown in the US economy than many had thought. The surprise jump in the ADP employer services report on private sector employment fanned expectations of an above forecast non-farm payrolls report on Friday, prompting the market to trim back chances of a 0.50% interest rate cut by the Federal Reserve next week. Rate futures indicate traders see a 38% chance of a 50 basis point cut, down from 54% just before the ADP data. A 25 basis point cut in the fed funds rate to 4.25% has been fully priced in. The US private sector added 189,000 private-sector jobs last month, the ADP report showed, helping to ease some market fears about trouble in global credit markets that had weighed on the greenback in recent sessions. Data on Friday will likely show that US employers, outside the farming sector, added 75,000 jobs last month. Demand for the US currency started to rise earlier in the session as a rebound in global equity markets prompted investors to buy back Dollars after two days of declines. EurUsd was 1.14% lower at 1.4595. UsdJpy rose to a session peak of 110.96 as short-term players took profits on the Yen's rise from the previous two days. It was last trading at 110.92, up 0.97%. Sterling fell to a 4-1/2-year low against the Euro as investors bet on an interest rate cut on Thursday after service sector and house price data came in below forecasts. EurGbp was up 0.39% at 0.72 after hitting 0.7240 intraday high. Expectations the Bank of England will lower it's main lending rate to 5.5% were also raised after the Bank of Canada surprised the market with a rate cut on Tuesday. GbpUsd fell 1.53% to 2.0269. AudUsd fell after the Reserve Bank of Australia kept interest rates at 6.75%, as expected, but said global growth could ease in 2008. It was trading down 0.14% at 0.8710.




Today's Key Issues (time in GMT):

08:30 GBP October Industrial Production 0.1% vs -0.4% (MoM)
08:30 GBP October Manufacturing Production 0.2% vs -0.6% (MoM)
10:00 EUR December OECD Economic Outlook
12:00 GBP Bank of England Rate decision 5.75% vs 5.75%
12:45 EUR European Central Bank Rate decision 4% vs 4%
13:30 USD weekly Jobless Claims 340k vs 352k
13:30 CAD October Building Permits 0.5% vs -1.7%
15:00 CAD November Ivey Purchasing Managers Index 55 vs 57.1
23:50 Q3 Final GDP 0.6% vs 2.6% (QoQ)



The Risk Today:

EurUsd Euro pulled back from last Friday 23rd November record high 1.4967. Breaking down the 4-month Trendline support, it might return down to two weeks ago support on 1.4520. On the downside, only a return below 1.4500 and further drop to 1.4280 former resistance would threaten the last 4-month uptrend. This could open the way down toward 1.4000 nearby support and 1.4125 trendline support. Initial resistance holds 1.4723 former support.

GbpUsd Cable corrected yesterday at 2.0269 -1.53% breaking 2.0354 support and narrowing near 2.0200 strong support. On the downside, renewed pressure might push below 2.0200 and toward 2.0000 psychological levels to complete the downtrend. On the upside, 2.0354 former support marks the resistance before 2.0833 Nov. 28th high. Initial resistance holds 2.0588 yesterday high.

UsdJpy Downtrend might have end with November. Last Friday break up 110 level had put 114 into focus. This may open the way toward 117.63 resistance. On the downtrend, supports hold 106.50 June 2005 low and 101.68 January 2005 low. Initial support holds 110 minor. Initial resistance holds 111.23 Friday high.

UsdChf Downtrend might come to an end further to rebound on 1.0888 23rd November low. Market had found support on 1.1000 key level. Initial resistance holds 1.1327 (30th Nov) high. It would also need a return over 1.1500 and 1.1640 level to relieve 6month bear threat. Initial support holds 1.1160 yesterday low.


Resistance and Support:




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