06/12/05
Comment
The Dollar was mixed against the major currencies last week. The Euro closed last week at 1.1716 having started the week at 1.1724. US$/JPY closed last week at 120.50 having started the week at 119.62. The GBP closed last week at 1.7333 having started the week at 1.7144. The A$ closed last week at 0.7423 having started the week at 0.7356.
last week recap
The Dollar slumped against the major currencies early in the week due to order flows and a host of technical factors such as end of month profit-taking and speculative short-covering. The Dollar spent the rest of the week strengthening against the Euro, CHF & Yen but was unable to pare back losses versus the Cable and Aussie. Stronger than expected economic data out of the States continues to assist the greenback. However, given the strength of the data one can argue that the dollar should have performed better. As expected the ECB raised rates by 25 basis points but the Euro actually fell. The reason for the fall was when ECB President Trichet said during his press conference that there was no plan for further tightening. In
The week ahead
Risks to global growth have shown no signs of materializing. This makes it difficult to come to anything other than a rather upbeat conclusion about the path of the global economy at present. Data releases out of the States and Eurozone is expected to reinforce healthy growth in the global economy.
In the States, one of the key market releases will be non-manufacturing ISM for November (Monday). The non-manufacturing ISM is not a composite but an overall sentiment index and large swings in sentiment have a tendency to be corrected in subsequent months. Comprehensive factory orders will be released on Tuesday. The final release out of the
In the Eurozone, the market will focus on PMI services released on Monday. Other main releases during the week have a German bias – with German new manufacturing orders (Tuesday) and industrial production (Thursday). The overall position appears to be that activity in the German manufacturing sector is recovering as past restructuring and the weaker euro have provided a boost to the country’s international competitiveness. In the
In
Key Weekly Pivot levels
EUR/USD – 1.1790
Euro continues to trade in a volatile 1.1650 to 1.1850 range. The lack of follow-through on both ends has the market perplexed. A decisive break of 1.1680 would signal a test of the downside towards 1.1586, the 38.2% retracement of the broad 0.8227 to 0.3663 advance. A decisive break of the congestion zone at 1.1903 (Oct 3 low) to 1.1907 (50% retracement of 1.2170 to 1.1644) is required to put doubt in the ability of the short-term bear trend”s ability to eventually post a new trend low.
USD/JPY – 120.90
The dominant technical theme remains bullish, with a break to new highs maintaining the up-trend pattern of higher highs and higher lows. Accordingly, the market is looking for further gains towards 121.89, a reactionary high from Mar 31, 2003, en route to 122.38, the 61.8% retracement of the Jan ”02 to Jan ”05, 135.18 to 101.67 decline. The markets bullish bias remains with weakness beneath Nov 28”s formerly resistant 119.95 level required to threaten the current positive tone.
GBP/USD – 1.7420
The break above 1.7375 (38.2% retracement of the 1.7904 to 1.7048 decline) keeps a positive outlook for
AUD/USD – 0.7510
The break of Nov 28”s 0.7456 corrective high and trend-line resistance originating from Sep 22 reinforced the developing recovery prospect from Nov 14”s 0.7261 low. With momentum conditions continuing to provide a positive backdrop, the market looks for extended gains en route to 0.7526, the 76.4% retracement of the 0.7605 to 0.7261 decline and 0.7600, the peak from Oct 27 thereafter. The immediate outlook remains constructive, with a loss of Nov 30”s 0.7371 low, required to threaten our preferred bullish view.
