Will Durable Goods data save the dollar?
Economical News
USD
The US Consumer Confidence came in at 107.2, falling short of consensus expectations of 109. February's Consumer Confidence was also downwardly revised to 11.3 from an initially reported 112.5 reading. As expected, consumers' concerns regarding the weakness in the housing sector were among the major reasons for this report's decline. March's report continues showing a strong divergence between the present situation component and the expectations component, and while the present situation component peaked to an almost 6 year high of 137.6, the expectations component fell from 93.8 to 56.9, its lowest level in 8 months.
The lower than expected consumer confidence, along with a weaker than expected Richmond Fed survey that came at -10 on expectations of -4, suggests that the Federal Reserve wont be able to hold the current interest rate level for too long. Following the report, the USD weakened against all major counterparts, reflecting traders renewed expectations for a rate cut later this year.
Today's calendar gears up and brings us the Durable Goods data, which is expected increase 3% MoM and 1.8% ex-autos. Yesterday's market reaction was lacking the momentum required for the EUR and the GBP to hit 1.34 and 1.97, respectively. Should today's data also fall short of expectations, there is a strong probability that the USD will continue to sell off and retest the 1.34 and 1.97 levels.
EUR
The German IFO Business Climate unexpectedly rose 1.2 pts to 107.7, while the expectations index rose 1 pt to 103.2. This has provided the EUR with some back wind to climb higher against its counterparts, but evidently not enough to hold it there. During the sessions that followed, the EUR tried basing above the 1.3330 level, but it seems any appreciation will not occur before the US market opens and the US data releases, since most EUR data for the day has already been released- most important of which was the M3 Money Supply which have increased 10% YoY. A higher Money Supply means inflationary pressures continue increasing, leaving the European Central Bank with a good enough reason to stick to there hawkish rhetoric.
EUR's price action today is very much dependant on the news scheduled for release elsewhere and the way its counterparts react to these events. Although the EURUSD 1.34 level seems hard to reconquer, a weak US data might send the pair to retest this level.
JPY
The JPY is showing some signs of recovery as inflation expectations in Japan rose after the BoJ governor Fukui provided the Diet's Upper House committee on financial issues his opinion regarding the prospects of inflation this year. The BoJ governor expects prices to remain at their current level for the upcoming months and then rise during the second half of the year. The data scheduled for release during the upcoming days from Japan will surely help the markets in shaping those expectations, and incase these indeed increase, the JPY has a lot more room to appreciate.
Technical Analysis
EUR/USD
Intraday studies suggest that the uptrend has lost most of its momentum. During the morning hours the pair crossed below the daily pivot at 1.3344, but found support at the S1 pivot, at 1.3326. The pair is expected to continue trade in a bearish sentiment for the next few hours, but the opening of the US market can very well change that.
GBP/USD
As with the previous pair, intraday oscillators are rather bearish, and given the strong 1.97 resistance, we see little chance for it to be broken. Never the less, stops should be cautiously placed in case shorting.
USD/JPY
An Elliott wave analysis of the uptrend that extends since mid May, 2006 reveals a precise 1-2-3-4-5-a-b pattern. In this case, we are now expecting a C wave that can extend as low as 114.50. Be aware that the uptrend has not been violated, and therefore any trades against the trend are not recommended and should be done with extreme caution.
USD/CHF
The pair continues heading towards the lower boundary of the channel we've mentioned yesterday, below 1.20. Substantial support will emerge at 1.2070 and 1.2030.
Wild Card
A negative divergence on the 4H chart MACD and Slow Stochastics of this forex pair exposes 1.6140 as a first target. The uptrend remains intact; short positions should be taken with great caution.
Market Trend
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
|---|---|---|---|---|---|---|
| Daily Trend |  |
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| Weekly Trend | |
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| Resistance | 1.3460 | 1.9830 | 120.76 | 1.2349 | 0.8169 | 0.6865 |
| 1.3408 | 1.9726 | 119.60 | 1.2278 | 0.8110 | 0.6833 | |
| 1.3366 | 1.9667 | 118.58 | 1.2223 | 0.8062 | 0.6816 | |
| Support | 1.3291 | 1.9530 | 117.20 | 1.2115 | 0.8044 | 0.6732 |
| 1.3250 | 1.9469 | 116.43 | 1.2081 | 0.8009 | 0.6713 | |
| 1.3200 | 1.9420 | 115.80 | 1.2036 | 0.7876 | 0.6700 |
Indicators
| Date | Time GMT | $€£¥ | Event | Period | Prev. | Forecast | Imp |
|---|---|---|---|---|---|---|---|
| 28/03/2007 | 08:00 | EUR | Eurozone M3 money supply Y/Y Feb | 9.8% | 9.8% |  | |
| 28/03/2007 | 09:30 | UK | U.K. Current account (gbp) | Q4 | -9.43B | -8.75B |  |
| 28/03/2007 | 12:30 | USD | U.S. Durable goods order Feb | -8.7% | 3.5% | | |
| 28/03/2007 | 12:30 | USD | ex. transportation Feb | 1.6% | -3.1% | N/A | |
| 28/03/2007 | 12:30 | USD | ex. defense | Feb | -8.5% | N/A | |