Stable Markets provide for confidence. All eyes on EZ and Japanese CPI data releases.
27/08/07
last week’s currency trading review
The Dollar had an eventful week succumbing to early pressure early in the week as ongoing speculation that the Federal Reserve would look to cut rates by a possible 0.50% in September ensured the Dollar bears outweighed the bulls. With rebounding equity prices demand for the USD dwindled as confidence in the market insured a return to offshore investments. Senator Christopher Dodd of the U.S. Senate Banking Committee moved markets when stationing that Federal Reserve Chairman Ben Bernanke had ensured him that the central bank would use every available tool maintain market stability, adding to further speculation of future rate hikes. The Euro rallied throughout the week on views that the ECB would look to increase interest rates in September, before taking a non-committal approach on Friday guaranteed the Euro remained in a tight range. The Euro closed last week at 1.3556 having opened at 1.3486.   The Japanese returned to its role as a low interest funding currency, which weighed heavy on the Yen, moving well away from recent gains. During the week the BoJ decided to keep rates unchanged with an 8 to 1 vote. The Yen closed last week at 115.69 having opened at 114.30.  The GBP like other high yielder’s moved on the upside breaking key 2.0000 in the latter part of the week. In data news, the GBP was also aided by buoyant GDP data out on Friday which recording the highest rise since 1996. The GBP closed last week at 2.0130 having opened at 1.9822. The AUD was able to rise 5% throughout the week on a steady grind up. The AUD closed last week at 0.8186 having opened at 0.7741.
The forex trading week preview
In the States with stock markets and the credit crunch still hover as a major factor in market movement, yet more attention is expected to be placed on the data releases compared to recent times. Monday kicks off the proceedings with Existing Home Sales, FOMC minutes (Tuesday), GDP on Thursday, whilst a heavy end to the week is expected as the U.S. release PCE, Chicago PMI, Michigan Sentiment and Chairman Bernanke speaks at a Fed symposium. We will provide our previews and reviews of these data releases in the daily summary.
In the Eurozone ECB president Trichet speaks on Tuesday, whilst a big Friday is scheduled with CPI and Unemployment Rate is made public. The German IFO survey is out this week on Wednesday. In the UK Most of the focus will be placed on House Prices on Thursday. We will provide our previews and reviews of these data releases in the daily summary.
In Japan plenty of focus will surround Tuesdays Retail Sales, ahead of Wednesdays CPI and Industrial Production data. We will provide our previews and reviews of these data releases in the daily summary.
In Australia Current Account (Thursday), Retail Sales and Trade Balance (Friday) will be the most important data releases. We will provide our previews and reviews of these data releases in the daily summary.
CURRENCY PAIR IN FOCUS
EUR/JPY With the credit crunch fears stemming from the US sub-prime mortgage market, the EUR/JPY has seen massive swings from all time highs to multi-month lows. With markets now asking whether the European Central Bank will increase rates in September and whether the Bank of Japan will hike to 0.75% next month, the eur/jpy may continue exhibiting wild swings. Coupled with a packed week of data, the EUR/JPY may be sensitive to poor/good data released throughout the week. The pair seems to be supported at 158.00 down to 156.50, with resistance being met around the important 160.00 level.
KEY WEEKLY PIVOTAL LEVELS
| Currency | Sup 2 | Sup 1 | Spot | Res 1 | Res 2 |
| EUR/USD | 1.3449 | 1.3534 | 1.3670 | 1.3665 | 1.3711 |
| USD/JPY | 113.67 | 115.29 | 116.45 | 117.15 | 117.89 |
| GBP/USD | 1.9915 | 1.9978 | 2.0135 | 2.0154 | 2.0272 |
| AUD/USD | 0.8064 | 0.8154 | 0.8285 | 0.8245 | 0.8275 |
| XAU/USD | 653.70 | 654.90 | 668.00 | 668.10 | 676.80 |
- Euro 1.3670
Initial support at 1.3534 (Aug 23 low) followed by 1.3449 (Aug 22 low). Initial resistance is now located at 1.3665 (61.8% retracement of the 1.3853 to 1.3360 decline) followed by 1.3711 (Aug 13 high).
- Yen 116.45
Initial support is located at 115.29 (Aug 23 low) followed by 113.67 (Aug 20 low). Initial resistance is now at 117.15 (Aug 23 high) followed by 117.89 (50.0% retracement of the 124.17 to 111.60 decline).
- Pound – 2.0135
Initial support at 1.9978 (Aug 24 low) followed by 1.9915 (Aug 23 low). Initial resistance is now at 2.0154 (50% retracement of the 2.0656 to 1.9652 decline) followed by 2.0272 (61.8% retracement of the 2.0656 to 1.9652 decline)
- Australian Dollar – 0.8285
Initial support a 0.8154 (Aug 24 low) followed by 0.8064 (Aug 23 low). Initial resistance is now at 0.8245 (Aug 24 high) followed by 0.8275 (50.0% retracement of the 0.8875 to 0.7674 decline)
- Gold – 668.00
Initial support at 654.90 (Aug 22 low) followed by 653.70 (Aug 20 low). Initial resistance is now at 668.10 (Aug 16 high) followed by 676.80 (Aug 8 high)
