Middle-east tensions undermine US Dollar. BoE rate decision due today.

Dollar fall Wednesdays following a rise in oil prices and continued concerns over the financial health of banks and mortgage lenders. Wall Street fell over 2% as rumours abound that investment banks still have large write-downs to declare. Merrill Lynch fell over 9% after Fitch Ratings indicated that it may cut the banks debt rating. An apparent attack on the US consulate in Istanbul also added to negative global sentiment toward the Dollar. Oil was trading at $136.50 barrel after rising above $138 after a sharp fall in US stocks and growing middle-east tensions. Gold was up 0.89% to 928.40, amid geopolitical tensions thus increasing the metals attractiveness as a safe-haven instrument. The BoE will decide interest rate policy later today with little chance of a shift in rates. Recent indicators show the UK heading towards a possible recession.
News and Events:


Dollar fall Wednesdays following a rise in oil prices and continued concerns over the financial health of banks and mortgage lenders. Wall Street fell over 2% as rumours abound that investment banks still have large write-downs to declare. Merrill Lynch fell over 9% after Fitch Ratings indicated that it may cut the banks debt rating. Merrill's along with other US banks report earnings next week. An apparent attack on the US consulate in Istanbul also added to negative global sentiment toward the Dollar.

Ex Fed President William Poole believes that the government-sponsored mortgage companies, Fannie Mae and Freddie Mac, are insolvent. Interesting questions maybe asked of Fed Chairman Bernanke and Treasury Secretary Paulson when they testify on the health of the financial system later today.

Oil was trading at $136.50 barrel after rising above $138 after a sharp fall in US stocks and growing middle-east tensions. EurUsd rose 0.41% to 1.5730. UsdJpy ended up 0.38% at 107.48 rebounding from earlier 106.25 low. UsdChf was up 0.71% at 1.0336 after having hit 1.0220 low in early session. GbpUsd jumped 0.58% to 1.9812 ahead of Bank of England rate decision. Gold was up 0.89% to 928.40, amid geopolitical tensions thus increasing the metals attractiveness as a safe-haven instrument.

The BoE will decide interest rate policy later today with little chance of a shift in rates. As recent indicators show the UK heading towards a possible recession but inflation accelerating at its fastest pace for over a decade then there is little that the central bank can do.

AUD rose sharply after employment data was much better than expected. The unemployment rate eased to 4.2% as 29,800 new jobs were added. AUD rose 0.18% to 0.9561.



Today's Key Issues (time in GMT):


07:30 DKK June Inflation (HICP) 4.2% vs 3.6% (YoY)
07:30 SEK June CPI 0.5% vs 0.4% (MoM)
07:30 SEK June CPI 4.3% vs 4.1% (YoY)
08:00 EUR July Euro-zone ECB monthly report
08:00 GBP June Halifax house prices -2% vs -2.4% (MoM)
08:00 NOK June Consumer price index 3.4% vs 3.1% (YoY)
08:00 NOK June Core inflation 2.4% vs 2.3%
11:00 GBP July BoE rate decision 5% vs 5%
12:30 USD weekly Initial claims 395k vs 404k
14:00 USD Fed’s Bernanke and Treasury’s Paulson testify, Washington
17:45 EUR ECB’s Trichet speaks on the Euro, Munich
19:30 USD Fed’s Yellen speaks on the economy, Portland
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

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Provided by ACM: http://www.ac-markets.com