Renewed weakness in oil prices and a break of 1.4850

The Dollar rallied to an almost six-month high against the Euro on Thursday amid growing concern over euro zone economic weakness and accelerating inflation in the United States. Traders sold the Euro after reports showed contraction in the Euro zone's economy in the second quarter. The Euro zone single currency accelerated its losses and fell below 1.4800 after it broke through key technical levels, analysts said. Government data showed US consumer prices rose at twice the rate expected in July. Analysts said higher prices in the short term may help boost the case for interest rate hikes by the Federal Reserve, although they warned that over time, inflation would hurt the economy. Oil prices are down more than $30 from a record high 145.45 hit in July. Crude oil settled 1.26% lower on Thursday at $114.93 a barrel.
News and Events:


The Dollar rallied to an almost six-month high against the Euro on Thursday amid growing concern over euro zone economic weakness and accelerating inflation in the United States.

Traders sold the Euro after reports showed contraction in the Euro zone's economy in the second quarter. The Euro zone single currency accelerated its losses and fell below 1.4800 after it broke through key technical levels, analysts said. Government data showed US consumer prices rose at twice the rate expected in July. Analysts said higher prices in the short term may help boost the case for interest rate hikes by the Federal Reserve, although they warned that over time, inflation would hurt the economy.

EurUsd was 0.35% lower at 1.4724. It is now more than 10 cents below a record high of 1.6039 struck in July. UsdJpy was 0.55% higher at 109.79. EurGbp declined 0.91% at 79.18. UsdChf rose 0.98% to 1.0967 after hitting 1.0836 low. GbpUsd was fairly unchanged at 1.8663.

Oil prices are down more than $30 from a record high 145.45 hit in July. Crude oil settled 1.26% lower on Thursday at $114.93 a barrel.

Goldman Sachs’s analyst sees the EurUsd falling to 1.4500 in three months, compared with previous estimates of 1.5600. The dollar has rallied more than 5% against the Euro this month with help from a sell-off in oil prices and weak data in Europe and Asia.




Today's Key Issues (time in GMT):


00:00 JPY Market Holiday
01:30 AUD Q2 Wage Price Index -0.5% vs 0.6% (yoy)
12:30 USD Aug NY Fed manufacturing -4.4 vs -4.92
12:30 CAD June Manufacturing sales 1% vs 2.7%
13:00 USD June Net L-T flows, exswaps 65b vs 67b
15:15 USD July Capacity utilization 79.8% vs 79.9%
15:15 USD July Industrial output 0% vs 0.5%
15:55 University of Michigan conditions prel 73.2 vs 73.1
15:55 University of Michigan expectations prel 53.9 vs 53.5
15:55 University of Michigan sentiment prel 62 vs 61.2
The Risk Today:

EurUsd:
Market dropped to 1.4762 low on Thursday following Friday break below 1.5304 former strong support from 13th June. Further weakness below 1.5000 will put the focus on strong support 1.4685 22nd January low. On the upside, only a return over 1.5500 will release actual pressure and put key initial resistance 1.6000 into focus. A break up there would open the way to Trendline resistance 1.6200.


GbpUsd:
Cable hit 2.0158 high 4-weeks ago and 1.8619 low yesterday. Key level holds 2.0100 resistance. On the downside, Friday break below 1.9337 January low support lead to market below 1.9105 (50% retracement of 1.7049 – 2.1162 advance). Former support 1.9363 holds strong resistance. Initial support holds 1.8619 yesterday low.


UsdJpy:
Last 3-weeks recovery pushed the market up to 110.40 high on Friday. The last break of 108.59 former resistance put focus on 110.10 strong resistance (Trendline). Further advance would open the way toward 111.92 early January high. On the downside, a return below 108.59 former resistance will undermine the current advance. Profit taking might bring back down to 105 level and may open the way toward 102.73 support and 100 pivot point. Initial support holds 108.53 today low.


UsdChf:
Recent Dollar strength pushed over 1.0500 last week and hit 1.0981 high yesterday. Market broke up resistance of the 3-months upper trendline at 1.0766 last week. Initial support holds 1.0500 key level. Renewed weakness below 1.0375 would retest the 1.0000 pivot point and may open the way toward 0.9637 17th March low.



Resistance and Support:



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