FX Daily Report

Daily Forex Fundamentals | Written by swiss pb | Oct 06 09 05:59 GMT |

The need to rebalance the global economy does not at all mean the dollar should depreciate against the euro, European Central Bank President Jean-Claude Trichet said on Monday. Many economists think the United States' huge trade and budget deficits mean the dollar may have to fall. But Trichet took pains to stress that the euro should not have to bear part of that adjustment. Trichet and some other European officials, particularly the French, have expressed concern in the last few weeks that excessive strength of the euro could hurt the region's exports. The euro has risen about 14 percent against the dollar since March and, at around $1.46, is not far from its record high of $1.6038, hit in July 2008. Asked what action might be taken to stop the dollar falling, Trichet said the G7 statement spoke for itself, adding that he put faith in assurances by U.S. policymakers that they wanted a strong dollar. Asked if the ECB was prepared to raise interest rates in the euro zone before unemployment peaked, as part of its strategy to unwind monetary policy measures taken during the financial crisis, Trichet replied that current rates were appropriate. A tepid economic recovery should allow the U.S. Federal Reserve to keep interest rates at rock-bottom lows for a prolonged period, New York Federal Reserve President William Dudley said on Monday. Because the U.S. economy faces many headwinds, including an anemic labor market and a fragile banking system, Dudley said, inflation will not become a problem in the foreseeable future. Japan's government urged the central bank on Tuesday not to end support for corporate funding too soon, with the finance minister saying the Bank of Japan needed to carefully consider the economic outlook and monitor funding. The outspoken banking minister went further, saying it was too early to discuss ending the funding support, amid growing expectations that the central bank will end schemes for buying commercial paper and corporate bonds in December. Finance Minister Hirohisa Fujii described the economy as unstable and said the BOJ was at a stage where it should appropriately monitor the situation for corporate funding EUR/USD: If the pair breaks important resistance at 1.4720, next target 1.4800 - 1.4820. Small correction till 1.4660 level is possible. Prefer buy in 1.4700 - 1.4670 area for target 1.4800. Stop loss below 1.4640. GBP/USD: The same strategy as yesterday. Prefer buy moving down till 1.5950. Stop loss below 1.5920, target 1.6100. USD/JPY: The pair could not break resistance at 90.00 yesterday and moved down till 88.95 level. Prefer sell rally till 89.40 for target 88.60. Stop loss above 90.00 USD/CHF: Prefer sell rally till 1.0330 for target 1.0220. Stop loss above 1.0350 swiss pb Disclaimer To the extent allowed by applicable law, swiss pb, its employees and partners disclaim without reservation any liability for direct, indirect or consequential damage and/or losses of any kind whatsoever arising from use of fact sheets, reports or access to the swiss pb website or from links to the websites of third parties. Furthermore, swiss pb disclaims without reservation any liability for damage to or influences on the internet user's IT system. In this regard, swiss pb particularly wishes to alert all visitors and users of the swiss pb website to the danger of viruses and the possible presence of hackers in Internet traffic and in telecommunications in general. swiss pb expressly recommends the use of the latest versions of browsers and the installation of regularly updated anti-virus software, and advises against opening e-mails and their attachments from unknown senders. Performance Past results and performance form no reliable basis for decisions regarding future investments and yield expectations. The value of investments can go up as well as down. Exchange rate fluctuations can likewise result in a loss of value. swiss pb can therefore undertake no guarantee that the value of invested capital will be preserved or increase.