Market is looking for direction in thin volumes

The Dollar rose against most major currencies on Tuesday as more weak global economic data renewed fears of a worsening crisis, slowing down a Wall Street rally and prompting safe-haven flows into the Dollar. The Yen also rose broadly as investors sold holdings of risky assets that were financed by borrowing the Japanese currency at low interest rates. Investors were also wary of taking on risk as they awaited a US emergency loan package for its top 3 automakers, while figures late last week showed that the US lost more than 500k jobs in November. The Bank of Canada was the latest to act, dropping borrowing costs to 1.5%, a 50 year low, on Tuesday and declaring the Canadian economy in recession.
News and Events:


The Dollar rose against most major currencies on Tuesday as more weak global economic data renewed fears of a worsening crisis, slowing down a Wall Street rally and prompting safe-haven flows into the Dollar. The Yen also rose broadly as investors sold holdings of risky assets that were financed by borrowing the Japanese currency at low interest rates.

Fear was so pronounced that the US Treasury sold $30 billion in four week bills on Tuesday at a high rate of 0%, meaning investors were willing to hand over cash to the government and receive no interest payments in return.

EurUsd was up 0.1% to 1.2927 and EurJpy fell 0.72% to 119.21, weighed down partly by a ZEW survey showing German economic sentiment for December remaining stuck near historically low levels. UsdJpy lost 0.56% to 92.47. GbpUsd was last down 0.79% at 1.4755. GbpJpy was 0.77% lower at 137.24. Uniformly grim UK economic data put the Sterling under pressure and economists pointed to further cuts in Bank of England interest rates.

Investors were also wary of taking on risk as they awaited a US emergency loan package for its top 3 automakers, while figures late last week showed that the US lost more than 500k jobs in November.

Rapidly weakening economies have led central banks to slash interest rates aggressively. The Bank of Canada was the latest to act, dropping borrowing costs to 1.5%, a 50 year low, on Tuesday and declaring the Canadian economy in recession. UsdCad rose 0.56% to 1.2604 after hitting a session high of 1.2744.





Today's Key Issues (time in GMT):


00:00 TRY Turkish Market Holiday
07:00 EUR November German Wholesale price index -1.4% vs -1.5% (mom)
07:00 EUR November German Wholesale price index 1.5% vs 3.6% (yoy)
07:45 EUR October French Industrial output -0.6% vs -0.5% (mom)
08:00 EUR European commission holds weekly meeting
08:30 DKK November CPI 2.6% vs 3.7% (yoy)
09:00 EUR October Italian Industrial output -0.8% vs -2.1% (mom)
09:00 EUR October Italian Industrial output -4.4% vs -5.7% (yoy)
09:00 NOK November Consumer price index 3.7% vs 5.5% (yoy)
09:00 NOK November Core inflation 3.2% vs 3.3%
10:00 EUR Q3 Italian GDP final -0.5% vs -0.3% (qoq)
10:00 EUR Q3 Italian GDP final -0.9% vs -0.1% (yoy)
13:30 CAD Q3 Labor productivity rate 0.2% vs -0.2%
15:00 USD October Wholesale Inventories -0.2% vs -0.1%
18:15 EUR ECB’s Stark speaks on financial crisis
19:00 USD November Federal budget -$172.5b vs -$98.24b
The Risk Today:

EurUsd:
Market is trading in the last 6-week trading range 1.2330 – 1.3298 but trying to break up the triangle consolidation pattern. This may open the way to 1.3500 target equal to 1.3302-1.2334 spread. On the further upside, only a return over 1.4000 (former trendline support) and 1.5000 will release actual pressure and may put key resistance 1.6000 into focus. Resistance holds 1.4002 former trendline support. Initial resistance holds 1.3081 25th November high. On the downside, recent weakness below 1.2430 21st November low may open the way down to trendline support 1.2208. Next long-term support holds 1.1640 November 2005 low. Further support holds 1.0739 September 2003 low.


GbpUsd:
Market dropped as low as 1.4471 last Thursday in current 5-month downtrend dropping from Mid-July 2.0158 high. Strong supports hold 1.3682 March 2001 low. On the upside, strong resistance holds 1.6673 30th October high ahead of 1.7080 (38.2% retracement of 2.1161 – 1.4558). Further resistance holds 1.7860 (50% retracement). Trading range is set between Tuesday 25th 1.5534 high and 1.4471 December low, respectively initial resistance and support.


UsdJpy:
UsdJpy remains under pressure hitting 91.60 low on Friday. Strong support holds 90.91 24th October low. Further downtrend may open 79.70 April 1995 low. On the upside, strong resistance holds 100 pivot point, but only a recovery over 103 upper trendline and 105 pivot point will put focus again on 108 and 110.67 15th August high. Initial resistance holds 97.43 24th November high.


UsdChf:
Market hit 1.2298 high on 21st November. Further strength may look for 1.2463 strong resistance ahead of 1.2506 (61.8% retracement of 1.4278 – 0.9639 decline). On the downside, renewed weakness below 1.1831 initial support and 1.1203 30th October low would undermine the current uptrend and reverse through 1.0692 22nd September low and down to 1.0500 and 1.0375. Such a move may look for 1.0013 15th July low in front of 0.9637 17th March low.



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