NEWS / Indicators

Dollar spikes on dovish ECB outlook

By Marc Spaelti - ACM Senior Trader Yesterdays News and Events: Central Banks acted as expected, the BOE left its rate unchanged at 4.5%, staying put for the 10th month in a row, the ECB hiked 1/4% to 2.75%, its third move since last December. The Euro had remained underneath of a short-term bearish trend throughout the European morning, unable to cross 1.28. It softened to key support 1.2740 on position squaring of speculative long positions after the rate announcement, the hard fall to 1.2630 followed as ECB??™s Trichet delivered his press conference in which his tone was a lot less hawkish than three days ago, leaving room to guess whether we will get to see the expected two additional steps to 3.25% by the end of the year. US Weekly Jobless Claims were also supportive of the US Dollar, the fell 35k to 302k, its lowest level in 2 months. The US currency made good gains against the Swiss Franc and Japanese Yen and much less against the British Pound, the bullish trend in EURGBP seems to have come to an end at the 0.69 long-term resistance. The Dollar also fared very well against Silver and Gold, the yellow metal has reached a low of 608 overnight, the chart above reveals that the 600/610 area is 62% correction of this years rise and corresponds with the 7-month trend, this should be a good buy level, expect to hold here and reverse towards 635 in the near-term.The FED has again reported an increase in Foreign Central Bank US debt holdings, $8.65Bln were added in the week ending June 7th. Todays Key Issues: Lots of data today in Europe, here the essential: German Trade Balance early at 6amGMT is expected to soften to ?‚¬11Bln from 14.3 in March.At 8.30GMT a widening UK visible Trade Deficit of ??5.6Bln is forecast for April and at 10am German April Industrial Production should show an increase of 2.4%, fully reversing the prior months drop. The Euroland OECD Leading indicator is also due at 10GMT, no forecast available, it stood at 109 in April.The US April Trade Deficit will be key data today at 12.30GMT, an increase to $65Bln from $62Bln is expected. While high, it is still sustainable as long as investments keep funding the gap.The Preliminary U. Michigan Sentiment Index for June is due at 13.50GMT, it fell to 79.1 in May, no forecast available. The Risk Today: EURUSD: Traded in low range around 1.2650 overnight. Initial resistance 1.2665, 1.2700 acts as a pivot today. A lower weekly close is significant and indicates that a descent towards 1.2450 can be expected next week. For today bias to sell euro on a rise around 1.2690 and look to extend the downside to 1.2590, more is possible if US data is again very strong. 1-H GBPUSD: Cable trend this week, resistance at 1.8460, a breech can carry the pair to 1.8510/30, a higher weekly close is bullish. If the trend survives the week, a fall to 1.8345 is a must, but it may overshoot and fall to 1.8260, next medium-term support level is only at 1.8140. 4-H USDCHF: Strong rally topped 1.2375, it closed the day above 1.23, base for additional rise towards long-term trend-line above 1.25. Key support area today is the 1.2240/60 level, while this holds we will maintain a bullish Dollar bias. Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.2740 K 1.8530 K 115.10 K 1.2520 K 1.2700 P 1.8510 S 114.45 S 1.2420 S 1.2665 M 1.8460 T 114.05 M 1.2370 S 1.2640 1.8430 113.90 1.2330 1.2630 M 1.8410 M 113.85 S 1.2300 M 1.2590 S 1.8350 K 113.40 K 1.2260 K 1.2555 S 1.8260 S 112.45 T 1.2180 S S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot