Will GDP help boosting the dollar up?
Economical News
USD
The greenback remains marred by a combination of uncertainties stemming from tension with Iran and growing skepticism toward the soft landing scenario for the US economy. The dollar continues to trade near its lows against most of the majors, hovering around 116.90 versus the yen and steady around 1.3310 against the euro.
Yesterday's Congressional testimony by Fed Chairman Bernanke highlighted the FOMC's inflation bias, emphasizing the need for close monitoring of lingering risks to inflation .The Fed is in a very precarious position at the moment as they balance the deterioration in the housing market and the downturn in growth with the rise in oil prices. Over the past week, oil prices have jumped 15 percent on the back of growing tensions with Iran. The rise in oil prices have in the past kept central banks on inflation watch and this time, things are no different.
The soft durable goods orders for March merely added to the recent slate of weak reports. Markets will continue to assess the state of the US economy with today's data, consisting of Q4 GDP, PCE, core PCE and the weekly jobless claims. The final revision for growth in Q4 is seen unchanged at 2.2%. The Fed's preferred index of inflation will also be released, with the Q4 personal consumptions expenditures forecasted to hold steady at -0.9%, while the core PCE figure is expected to stand at 1.9%. Although Fed Chairman Bernanke played down the prospects for a rate cut, we continue to maintain the next move by the FOMC will be a reduction in the Fed funds rate - primarily due to continued deterioration in US economic fundamentals over the coming months.
Bernanke also reaffirmed the Fed's view that 'the economy appears likely to continue to expand at a moderate pace over the coming quarters' and by saying that Bernanke is giving the USD holders hope for the future .
EUR
The euro holds steady above the 1.33-level against the dollar, but remains pressured versus the yen amid renewed speculation of carry trade unwinding as a result of heightened risk aversion. In the coming session, traders will analyze unemployment data from Germany, which is expected to improve to 9.2% from 9.3%. Meanwhile, the unemployment change is forecasted to improve to -40k, compared with -79.0.
Like the Federal Reserve, the European Central Bank reiterated their own concerns for inflation risk. ECB President Trichet said that monetary growth is vigorous and interest rates are still on the accommodative side, suggesting that the central bank may be considering another rate hike. when consumer confidence was slightly weaker in April, the slowdown in consumer price growth was less than expected while the growth in M3 for the Eurozone as a whole was particularly strong. There is a number of important Eurozone data due for release tomorrow, which includes German and French unemployment and Eurozone retail PMI. The market is looking for an improvement in the labor markets, but deterioration in consumer spending. The recent Eurozone data suggests that the Value Added tax has only had a limited impact on the Eurozone economy, However now that Germans have to deal with a higher tax And higher oil prices, the sustainability of strong spending going forward is questionable.
JPY
The Japanese Yen performed very well today as risk aversion sends investors out of their recently reestablished carry trade positions. The weakness in stock markets around the world and growing geopolitical risks (Iran showed pictures of the UK hostages on TV today) are all reasons that support the cautious sentiment. There was no Japanese data released last night, but this evening we are expecting the CPI and Jobless Rate. Consumer spending has long been one of the weakest parts of the Japanese economy. After a sharp drop in the month of January, we are looking for a strong rebound. However when it comes spending, we often see more disappointments than upside surprises.
Technical Analysis
EUR/USD
Strong resistance has been noticed at 1.3360 and further up at 1.3400, however indicators are rather neutral with a tendency to be on the bearish side. RSI is at 60 facing downwards, momentum is at 100.30, and slow stochastic is at 50.
A range trading between 1.3250 and 1.3360 is more likely.
GBP/USD
This pair is targeting a new high soon the support at 1.9750 is pretty attainable at the monument where RSI is at 80 and Momentum readings are at 101.5 with a slight curve upwards, although daily slow stochastic is neutral at 60. We are likely to see a new high for this pair soon.
USD/JPY
The USD is recovering now 100 pips after touching the 116.30 and reversing back to 117.37, RSI is at 50 forming an upward reversal on the 2 hours charts where the next resistance level is at 118.15, however the volatility on the daily charts has dropped and a it may slow economic development, but not by much range between 118.15 to 116.30 has been created.
USD/CHF
This pair has come back up from yesterday's low of 1.2077 to 1.2163 and has been trading a tight range in the last 8 hours, daily slow stochastic is at 50 and RSI is at 55 with a neutral behavior.
Wild Card
GBP/JPY
This forex pair is recovering from yesterdays low at 228.75 back to 230.60 levels at the moment daily momentum is at 102.7 and RSI is starting to lose ground from 80 however longer term predictions are still bearish to test the 220 level once again.
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 |
|---|---|---|---|---|---|---|---|
| 29/03/2007 | 10:00 | UK | CBI Distributive Trades Survey - Expected | APR | 16 | 18 |  |
| 29/03/2007 | 10:00 | UK | CBI Distributive Trades Survey - Realized | MAR | 19 | 20 | |
| 29/03/2007 | 12:00 | EUR | ECB President Trichet Speaks | | |||
| 29/03/2007 | 12:30 | USD | GDP Annualized | q/q | 2.2% | 2.2% | |
| 29/03/2007 | 12:30 | USD | GDP Deflator Annualized | q/q | 1.7% | 1.7% | |
| 29/03/2007 | 23:30 | JPY | Core Tokyo CPI | m/m | -0.1% | 0.1% |  |
| 29/03/2007 | 23:30 | JPY | Core CPI | m/m | 0.1% | -0.1% | |
| 29/03/2007 | 23:30 | JPY | Manufacturing PMI | 52 | | ||
| 29/03/2007 | 23:50 | JPY | Industrial Production | m/m | -1.7% | -1.0% | |