GFT Analyst

Until today the market has failed to follow-through on the Dollar’s downside to any significance beyond Monday’s early collapse. Today has a few releases up for grabs but little of any substance to move rate significantly from Europe.

After a day off yesterday we are seeing some potential movers from the States in the factory orders, ISM non manufacturing and some preliminary private employment measurements. The latter will lead into the non farm payrolls from the States on Friday. The Fed is also due to publish the Beige Book later today.

In addition tomorrow we have the ECB and BOE rate decisions although these are almost certainly going to see no changes but still it should keep the Dollar in tighter ranges today pending the U.S. releases later.

However, we should note that the market failed to take advantage of some quite negative comments from several Fed officials and therefore we shouldn’t discount a significantly lower Dollar again today. There are some downside risks

Technically there is still room for declines to 1.5322 Euro, 1.0216 Swissie and 101.67-82 Yen. However, a decent correction appears overdue.

Neither should we forget that there has been increased rhetoric from the ECB and IMF on the excessive weakness of the Dollar with Trichet calling on U.S. officials to do something about the plunging Greenback.

Concerted intervention? Maybe.
It is an action that has been sidelined for several years but times are tough and the pressures now facing the States are substantial and while a sliding Dollar may make U.S. exports cheaper it also agitates the inflationary pressures and this is something that will make the Fed’s actions more complex.

Such a move would find welcome interest from Japan which is suffering not only from lower global demand but also from the effective rise in pricing with the Dollar down 20% from last year’s 124.13 peak.

The ECB would probably welcome the move also. Its officials have been bemoaning the strength of the Euro and the instability makes it tougher for the CB to hike rates to counter-act inflationary pressures.

The second half of the week should prove a lot more interesting than the first…

Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 104.74-92 1.5322-50 1.0525-64 1.9971-06
Res: 103.69-92 1.5238-75 1.0425-56 1.9900-10

Spt: 102.60-93 1.5120-56 1.0375-85 1.9783-10
Spt: 101.67-82 1.5000-22 1.0280-07 1.9666-00