Dollar rises in choppy trade with thin volume
News and Events:
The Dollar rose against the Euro on Monday, reversing early losses in a late surge as investors snapped up the greenback in thin trading after the single currency failed to sustain gains fueled by fighting in the Middle East.
Sterling hit a record low against the Euro, approaching parity with the single currency after reports pointed to a further slide in UK home prices in 2009. The British pound also hit its lowest against the Dollar in more than 6 years. The euro is heading near a 33% gain versus the Sterling this year.
Investors have generally found refuge in the Dollar in times of geopolitical uncertainty. But that has changed in recent weeks as the recession in the world's largest economy has deepened and government bond yields have sunk to record lows.
Sterling hit a record low against the Euro, approaching parity with the single currency after reports pointed to a further slide in UK home prices in 2009. The British pound also hit its lowest against the Dollar in more than 6 years. The euro is heading near a 33% gain versus the Sterling this year, its biggest annual rise ever, with Sterling on a weakening path amid a growing view a deepening UK slump may prompt the Bank of England to cut interest rates further. UK rates are currently at 2%, the lowest in 57 years.
In contrast, generally higher rates in the euro zone have increased the Euro's appeal against the Sterling as it has narrowed the yield spread between euro-zone and UK government bonds. Analysts said the reluctance of European Central Bank President Jean-Claude Trichet to commit to lower interest rates in the coming months to battle the region's own recession has also contributed to the euro's broad rally.
Today's Key Issues (time in GMT):
09:00 EUR November Euro-zone Money – Private loans 7.5% vs 7.8%
09:00 EUR November Euro-zone Money–M3 annual growth 8.5% vs 8.7%
10:00 EUR November Italian Producer prices -1.2% vs -1.5% (mom)
10:00 EUR November Italian Producer prices 2.9% vs 5.2% (yoy)
14:45 USD December Chicago PMI 33 vs 33.8
15:00 USD December Consumer confidence 45 vs 44.9
The Risk Today:
EurUsd Market traded as high as 1.4720 in December but reversed most of its gain around 1.4000. Uptrend remains and room is open for 1.4867 23rd October high. A return over 1.5000 will clear the last 3-month pressure and may put key resistance 1.6000 into focus. Initial resistance holds 1.4363 yesterday high. On the downside, 1.3899 and 1.3600, former resistances, hold supports. Further support holds 1.2208 trendline support. Next long-term support holds 1.1640 November 2005 low and therefore 1.0739 September 2003 low.
GbpUsd Market reversed most of Cable gains from mid-December and traded below 1.5000. Sentiment remains mixed but renewed strength may open the way to 1.6075 (38.2% retracement of 1.8669 – 1.4471 decline) and even 1.6570 (50% retracement). Uptrend may look for 1.6673 30th October high strong resistance. Further resistance holds 1.7816 (50% retracement of 2.1161-1.4471 decline). On the downside, strong supports hold 1.4471 December low ahead of 1.3682 March 2001 low. Initial support holds 1.4383 yesterday low.
UsdJpy UsdJpy is still under pressure in the last 4 months and traded as low as 87.14 on 17th December before recovering to 90.99 high. Strong support holds 87.14. Further downtrend may open 79.70 April 1995 low. On the upside, strong resistance holds 100 pivot point, but only a recovery over 103 upper trendline and 105 pivot point will put focus again on 108 and 110.67 15th August high. Initial resistance holds 93.91 ahead of 97.43 24th November high.
UsdChf Market traded as low as 1.0414 Mid-December in this months downtrend. It dropped to 1.0511 yesterday. Further weakness may open the way down to 1.0500 and 1.0375. Such a move may look for 1.0013 15th July low in front of 0.9637 17th March low. Renewed up and over 1.2298, 21st November high, strength may look for 1.2463 strong resistance ahead of 1.2506 (61.8% retracement of 1.4278 – 0.9639 decline). Former support 1.0955 holds minor resistance.
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