Forex Market Issues and Risks

Daily Forex Fundamentals | Written by AC-Markets | Jul 03 08 08:30 GMT |

Dollar dropped after ADP report ahead of early US jobs release

News and Events:

The Dollar dropped against the Euro on Wednesday after a report showed the US private sector shed more jobs than expected in June, which may diminish the likelihood of a rate increase by the Federal Reserve.

The ADP Employer Services data, which showed the largest drop since November 2002, is often seen as a precursor to the government's monthly report on the labor market (early release on Thursday). Poll of Economists expect another drop in non-farm payrolls last month.

Forex investors bought the Euro ahead of an expected interest rate hike by the European Central Bank on Thursday. The ECB is widely expected to lift its key lending rate by 25bp to 4.25%, and President Jean-Claude Trichet's news conference after the meeting may indicate further increases. Higher benchmark rates in Europe will boost the return of Euro-denominated assets and weight on the greenback. More fuel for ECB hawks came from euro zone producer prices, which were above forecast at 7.1%(YoY) in May, with euro zone headline inflation running at 4.%.

Yesterday, EurUsd was 0.58% higher at 1.5883, having earlier hit 1.5892 2-month high. EurJpy went up 0.33% at 168.21. UsdJpy edged lower to 105.89, down 0.26%, retracing from 106.78 intraday high. UsdChf dropped 0.67% to 1.0141. GbpUsd was 0.07% lower at 1.9928 in a volatile session.

US Treasury Secretary Henry Paulson said on Wednesday that the US economy faced a tough Q2 and Europe would not be immune to the impact. He also said high oil prices, further home price declines and capital markets turmoil will prolong the American economic slowdown, while Europe and Britain were also showing signs of slower growth.

Sterling fell broadly as tumbling UK housing shares and a profit warning from retailer Marks and Spencer cast a shadow over the slowing British economy. Charlie Bean, Bank of England deputy governor, said the British economy is facing its most challenging time since at least the early 1990s.

Euro and Dollar fell against a broadly stronger Australian Dollar, which jumped after Australian retail sales soundly beat expectations for May. AudUsd advanced 0.85% to 0.9629, near a 25-year 0.9669 peak set on Monday. At 7.25%, Australian interest rates are among the highest in the industrialized countries.

Today Key Issues:

• 05:45 CHF June CPI 0.3% vs 0.8% (MoM)
• 05:45 CHF June CPI 3.1% vs 2.9% (YoY)
• 08:30 GBP June PMI services 49.5 vs 49.8
• 09:00 CHF SNB releases Monetary Policy Report and Quarterly Bulletin
• 11:45 EUR ECB announces interest rates 4.25% vs 4%
• 12:30 USD June Nonfarm payrolls change -60k vs -49k
• 12:30 USD Initial Jobless Claims 385k vs 384k
• 14:00 USD June ISM Non-Manufacturing composite 51 vs 51.7

The Risk Today:

EurUsd Market broke up top of the current 1.5400-1.5800 trading range hitting 1.5892 high. Further advance 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 2-month uptrend on hold. This may open way down to 1.5000 key level. Support holds 1.5304 13th June low. Initial support holds 1.5760 pivot point.

GbpUsd Cable hit 2.0000 psychological level on Tuesday. But reversed gains and closed at 1.9943. On the upside, psychological 2.0000 level stays into focus. On the downside, a reversal below 1.9600 might bring again target on 1.9337 January low and 1.9105 (50% retracement of 1.7049 - 2.1162 advance). Initial support holds 1.9800 former range resistance. Strong support holds 1.9363 20th February and 14th May low.

UsdJpy Market broke down lower 3-month trendline at 106.30. Current 3-month uptrend failed to overtop 108.59 16th June high. More profit taking would bring the market lower than 105 and maybe back to 100 - 104 consolidation trading range. Initial support hold 105.86 Friday low. Renewed advance to 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.

UsdChf Market couldn't hold 1.0200 lower support last Friday. Strong support holds 1.0148 June 9th low. Initial support holds 1.0166 Friday low. Further weakness may open the way toward 0.9637 17th March low. June 13th 1.0541 high holds initial resistance. A return over 1.0200 would bring back consolidation 1.0200 - 1.0600 range.

EURUSD		GBPUSD		USDJPY		USDCHF
1.6200	T	2.0100	P	111.92	K	1.1191	K
1.6000	K	1.9800	S	110.10	T	1.0625	T
1.5892	M	1.9967	M	108.39	M	1.0200	M
1.5880		1.9925		105.90		1.0148
1.5760	P	1.9880	S	105.86	S	1.0000	P
1.5285	S	1.9337	T	104.44	M	0.9888	S
1.5000	K	1.9105	K	100.00	P	0.9637	K
S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot

ACM FOREX

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