Mon, Mar 10 2008, 10:50 GMT
by Peter Rosentreich
ACM - Advanced Currency Markets
News and Events:
The Dollar rebounded from record lows on Friday as a Federal Reserve liquidity injection fueled some speculation the central bank might hold off on cutting interest rates aggressively even after a sharp contraction in US payrolls. Profit-taking and short-covering also helped support the Dollar, traders said, after three days of successive sharp gains in the Euro, which brought the European currency to historic peaks.
The Fed announced a series of term repurchase operations totaling $100 billion to ease liquidity pressures in stressed financial markets, overshadowing a Labor Department report showing US employers cut payrolls for a second month in February. Interest rate futures reflected reduced views of the chances of a 75bp cut in the Fed's benchmark overnight lending rate at the March 18 meeting, to 96% from 130% earlier. The fed funds rate target is currently at 3% after being lowered by 225bp since mid-September.
On Friday after the February payrolls report, the Euro initially surged to 1.5462 high. The 63k jobs decline was the biggest monthly drop in nearly five years, the Labor Department said. Economists’ pool had forecast 25k jobs would be added to payrolls last month.
EurUsd traded down 0.18% at 1.5356 as investors considered the US interest rate outlook. UsdChf slumped to historic troughs at 1.0134 low, before recovering to trade up 0.16% at 1.0223. UsdJpy dropped to its lowest in eight years at 101.42, before regaining ground to trade flat at 102.68.
The Fed said it would increase amounts in its Term Auction Facility auctions on March 10 and March 24 to $50 billion each, a rise of $20 billion from the amounts announced for each of these auctions. The measures might ease pressure on the Fed to cut interest rates steeply. Aggressive monetary easing has erased the Dollar's yield advantage against currencies like the Euro. The European Central Bank has kept its refinancing rate at 4%, citing rising inflation pressures. ECB President Jean-Claude Trichet on Thursday dashed expectations of a rate cut any time soon, with the central bank upwardly revising its inflation forecasts.
Today's Key Issues (time in GMT):
09:00 NOK February Consumer Price Index 3.7% vs 3.7% (YoY)
09:00 NOK February Core Inflation 1.9% vs 1.9% (YoY)
09:30 EUR March Sentix Index 2.7 vs 4.3
09:30 GBP January Industrial output 0.1% vs -0.1% (MoM)
09:30 GBP January Industrial output 0.5% vs 0.6% (YoY)
09:30 GBP January Manufacturing output 0.0% vs -0.1% (MoM)
09:30 GBP January Manufacturing output 0.1% vs 0.0% (YoY)
09:30 GBP January PPI Core Output 0.4% vs 0.8% (MoM)
09:30 GBP January PPI Core Output 3.2% vs 3.2% (YoY)
12:00 EUR G10 news briefing with Trichet at regular BIS meeting, Basel
12:15 CAD February House Starts 202k vs 222.7k
14:00 USD January Wholesale inventories 0.4% vs 1.1%
21:45 NZD 4Q terms of trade 3% vs 3.6%
00:01 GBP February BRC Retail
The Risk Today:
EurUsd Euro posted a new all-time high 1.5462 on Friday. Medium term trading range is still 1.4500 – 1.5600. Initial support hold 1.5146 last Wednesday low. Psychological 1.5000 level marks strong key support before 1.4500 pivot point. Initial resistance hold 1.5396 Thursday high.
GbpUsd Cable advanced as high as 2.0217 on Friday. Psychological 2.0100 former resistance level marks support. Renewed pressure below 2.0000 might reopen the way down to 1.9337 January low and 1.9105 (50% retracement of 1.7049 – 2.1162 advance). Further support holds 1.9630 former Trendline resistance.
UsdJpy It remains weak after last 2-week down trendline. On the downside, further weakness might open the door down to 101.68 January 2005 low and 101.22 November 1999 low. On the Upside, only a return over 108 may open the way up to 110.10 strong (Trendline) resistance and mid January double top ahead of 111.92 early January high. Initial support holds 101.42 Friday low.
UsdChf Market remains weak, trading down to 1.0134 Friday low. Further weakness might open the way down to 1.0000 psychological level. Uptrend would return over 1.0700 and open the way for 1.1130 (38.2% of 1.1603 – 1.0838 decline). Early January double top 1.1191 marks strong resistance.
Resistance and Support:
| EURUSD | GBPUSD | USDJPY | USDCHF |
| 1.5600 T | 2.0577 T | 110.10 T | 1.1500 P |
| 1.5500 M | 2.0447 S | 108.00 K | 1.1107 S |
| 1.5396 S | 2.0140 M | 105.00 S | 1.0761 M |
| 1.5385 | 2.019 | 102.1 | 1.021 |
| 1.5280 M | 2.0100 K | 101.68 S | 1.0200 S |
| 1.5000 K | 2.0000 P | 101.42 M | 1.0134 M |
| 1.4500 P | 1.9630 K | 101.22 T | 1.0000 K |
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