NEWS / Monetary Policy

Dollar risks a slump

By Marc Spaelti - ACM Senior Trader Yesterdays News and Events: Friday saw the dollar come under pressure, EURUSD had a sharp spike up as US Non-farm payrolls increased by just 75k, the lowest increase of the year, the April data was revised down to 126k. EURUSD closed the week above 1.29, Cable managed to trade up to 1.8865, reversing all of the previous week’s losses to end the week at its high. This morning the Dollar trades at key support levels, 1.2965 is key against the Euro, 111.55 against the Japanese YEN and bypassing 1.8885 against the British Pound will set-up a bearish Dollar week. It is widely expected that the ECB will hike their interest rate this Thursday and unless the FED follows suit at the end of the month, the possibility of a narrowing interest-rate gap may lead to additional Euro buying. Todays Key Issues: Large parts of Europe will remain closed for Pentecost holiday. Expect trading to be thin before NY joins the markets UK May Services PMI is due at 8.30GMT, expect it to remain stable around 59 after 59.7 in April US May Non-Manufacturing PMI at 2pmGMT is expected to fall to 60 after 63 in April. FED Bernanke, ECB Trichet and BOJ Muto are meeting for a central-bankers conference, expect to see them speak from 5.15GMT onwards. The Risk Today: Daily EURUSD: We are trading at 1.2765, this is the key resistance. Should the Dollar survive and the day close underneath of this level, we look forward to further consolidation, a dip back to 1.2700 is easily possible, as the medium-term chart shows, there is lots of room to expand the correction down towards 1.25. However, in case that a high daily close can be achieved, we must try the 1.30 level first, upside potential is for 1.3150 this week. 30-min USDCHF: It is the most bearish of all the Dollars. Crossing 1.2140 on Friday, it has breeched the slow-rising corrective support with a low weekly close. Key support area at 1.2000/1.2040 must hold, while it does we can rally back to 1.2140. A break at the bottom is bearish, expectations would be for an immediate retry of the 1.1950 May-low and high risk of falling to as low as 1.1770 this week. Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.30500 S 1.8965 K 113.40 K 1.2260 K 1.2995 M 1.8885 S 112.70 S 1.2165 S 1.2960 K 1.8860 M 112.00 M 1.2100 M 1.2940 1.8820 111.65 1.2070 1.2915 M 1.8815 M 111.55 K 1.2040 K 1.2885 S 1.8775 S 111.15 M 1.2000 S 1.2740 K 1.8590 S 110.50 S 1.1935 M S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot