NEWS / Foreign Exchange

Dollar falls in illiquid markets

By Marc Spaelti - ACM Senior Trader Yesterdays News and Events: With the UK and the US both closed on Monday, Forex markets kept to tiny ranges throughout the day. It was in late NY and throughout the night that the Dollar came under pressure in a fairly empty market. This move continues here in early Europe this morning, with EURUSD at 1.2860 and Cable at 1.8760 we have come very close to medium-term resistance levels. The Dollar must hold here if we want to continue with our bullish bias this week. The March Euroland Current Account showed a deficit of €1.3Bln, the February deficit was reduced to €0.4Bln. Net Investment Inflows grew by a very high €35Bln, a big surge in portfolio investments made the bulk of the increase from €13.2Bln in February. BOJ Governor Fukui this morning said that the process of reducing excess liquidity is coming to an end soon. The comments relate to the fact that the BOJ was forced to inject liquidity in short-term money markets in order to keep overnight interest rates underneath of 0.1%. It is the third time in the past 10 days that it was forced to add cash through the interbank-market after weeks of slowly draining excess liquidity. Todays Key Issues: US Conference Board Confidence Index for May is due at 2pmGMT, it stood at 109.6 last month and is forecast to drop to 101. The Risk Today: EURUSD: It traded up to 1.2865 this morning, key resistance to watch is the 1.2875 level, while underneath we like to take advantage of the current spike and sell here, expect to return back to 1.2700 soon. Additional resistance 1.2920, strong at 1.2960, a high daily close calls for a move through 1.3000. Initial support 1.2820, 1.2770 is next. 4-H GBPUSD: High of 1.8770 traded, the key resistance lies at 1.8775. Despite bypassing bearish resistance this morning, we want to see a daily close above 1.8775 before we abolish our bullish Dollar view, this morning we like to establish fresh shorts and fall back to 1.8500. Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.2965 S 1.8885 S 113.00 S 1.2260 K 1.2920 M 1.8825 M 112.70 S 1.2240 S 1.2885 K 1.8775 K 112.00 M 1.2170 M 1.2850 1.8750 111.70 1.2130 1.2820 M 1.8710 M 111.55 K 1.2125 S 1.2770 M 1.8650 S 111.15 S 1.2095 T 1.2700 K 1.8585 S 110.50 S 1.2000 K S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot