06/03/06
last week’s recap
The Dollar had a relatively steady week against the major currencies early in the week given mixed results on the data front. The dollar suffered losses later in the week mainly due to positive data and hawkish comments from Trichet out of the Eurozone. The Euro put in a strong showing last week as it rallied nearly 200 points versus the dollar. The widely expected increase in interest rates to 2.5% was accompanied by hawkish words from ECB President Trichet, who indicated that there are going to be further rate rises should the current inflationary risks persist. The Japanese yen consolidated for moos of the week by trading sideways in a relatively narrow range. The Sterling followed the lead of the Euro and rallied over 150 points in the week versus the dollar. The market perception is that a rate cut from the Bank of England is less likely, and therefore the market focused on general economic conditions and the housing market, with both appearing to be in good health at present. The Aussie strengthened versus the dollar last week. On the economic front the GDP data release came in slightly below expectations but retail sales came in above expectations. January’s trade balance revealed that increased volumes and prices of imports will continue to be a drag on GDP growth, the deficit hitting AUD 2.69 billion.
The week ahead
The underlying trends in the US labour market remain positive February payrolls could suffer somewhat from the recent bad weather, limiting the gain. In Germany, both orders and output are expected to bounce after the recent poor reports, but once again the weather could have limited the rise in production. In Japan it seems that a monetary policy tightening is on its way, although analysts are not expecting it in the coming week.
In the States as per usual this time of the month, the main release is going to be the US employment report, for February (Friday). Analysts are of the opinion that the underlying labour market conditions have continued to improve. Initial jobless claims (Thursday) have held below the 300k mark, and the pool of unemployed has been shrinking. However, the massive snowstorm that blanketed much of the US east coast occurred in the week of the payrolls survey. This could definitely have affected employment in weather dependent industries, such as construction and transportation. In other data, the US trade deficit is forecast to have widened in January (Thursday). We will provide our previews of these data releases in the daily summary.
In the Eurozone the market focus will most likely be in German industrial production (Thursday). The number was surprisingly weak in December and is expected to rebound. France has lagged its larger neighbor however there have been signs of an improvement in the French surveys (INSEE and the PMI’s). So the market is expecting some catch-up in French production for January (Friday), albeit one limited in extent. In the UK industrial production data is also due on Thursday. The trend here continues to look poor, and although the most recent CBI Industrial Trends Survey was better than expected, the PMI reports continue to suggest a very subdued profile. The market will also pay close attention BOE’s stance on monetary policy (Thursday). Policy is expected to have remained in a “wait-and-see” mode – the next key release in the UK will come in the subsequent week with retail sales. We will provide our previews and reviews of these data releases in the daily summary.
In Japan the monetary policy debate has renewed the market interest in the BOJ meetings (Thursday). The key data release is the exceptionally erratic private machinery orders (Friday), which look vulnerable to a setback after December’s extraordinary 6.8% monthly gain. We will provide our previews and reviews of these data releases in the daily summary.
Key Weekly Pivot levels
| Currency |
Sup 2 |
Sup 1 |
Spot |
Res 1 |
Res 2 |
| EUR/USD |
1.1800 |
1.1825 |
1.1885 |
1.2094 |
1.2133 |
| USD/JPY |
115.45 |
116.04 |
117.50 |
118.54 |
119.01 |
| GBP/USD |
1.7278 |
1.7329 |
1.7360 |
1.7626 |
1.7685 |
| AUD/USD |
0.7233 |
0.7317 |
0.7335 |
0.7407 |
0.7488 |
Euro 1.1885
Initial support at 1.1825 (Feb 27 low) followed by 1.1800 (76.4% retracement of 1.1638 to 1.2324). Initial resistance is now located at 1.2094 (Mar 6 high) followed by 1.2133 (61.8% retracement of the 1.2324 to 1.1825 decline).
Initial support is located at 116.04 (March 6 low) followed by 115.45 (March 1 low and 10 month trendline support). Initial resistance is now at 118.54 (Feb 23 high & approx 76.4% retracement of 119.41 to 115.45 decline) followed by 119.01 (Feb 21 high).
Initial support at 1.7329 (Mar 7 low) followed by 1.7278 (Feb 14 low). Initial resistance is now at 1.7626 (Mar 6 high) followed by 1.7685 (61.8% retracement of the 1.7937 to 1.7278 decline).
Initial support at 0.7317 (76.4% retracement of the 0.7233 to 0.7590 advance) followed by 0.7233 (Dec 27, 2005 low). Initial resistance at 0.7407 (Mar 7 high) followed by 0.7488 (Mar 2 high).
