NEWS / Monetary Policy

Dollar end the week bid on geopolitical worries

By Marc Spaelti - ACM Senior Trader Yesterdays News and Events: Save-heaven purchases have helped the Dollar end at the high. EURUSD maintained the 1-week bearish trend and slowly traded down to 1.2620, Cable also shed one cent but has not breeched the 1.8350 low of the week. US data were not the reason for the greenbacks strong performance: Retail Sales were down 0.1% and the preliminary reading of the July Michigan Consumer Sentiment was dropped to 83.0 from 84.9 in June, but they barely did more than slow down the Dollars ascension. Best performer last week was Gold, it surged ahead to above $670, gaining more than 5% over the past five trading days. Expect profit-taking to limit the metals rise to between $685 and $700 in the coming days. The G-8 meeting in St.Petersburg was marked by event in the Middle East. World leaders agreed to a statement urging all parties to show restraint. Most important news on the economic front is certainly the Russian pledge to open its energy sector, allowing for more oil and gas exports to Europe, foreign exchange was not discussed. Todays Key Issues: Euroland Industrial Production is due at 9am. After a 0.6% drop in April, a strong 1.4% increase is expected in May. The July US Empire State Survey is due at 12.30GMT, no forecast is available, it stood at 29 in June. US June Industrial Production is due at 13.15GMT, it ought to grow 0.4% after a 0.1% drop last month, Capacity Utilization should stand at a slightly improved 81.9% (81.7%). The Risk Today: 4-H EURUSD: Bearish trend-line has survived a full week, it lies at 1.2665 this morning. While underneath, a challenge of the medium-term support at 1.2580 can be expected, for now we doubt that this level will be broken on a daily basis and suggest buying Euro. A break of the short-term trend should spur a rise to 1.2700 key resistance, once cleared there is plenty of room for a rise towards 1.30 with strong resistance at 1.2820 on the way up. Risk to the downside upon breaking 1.2585 is for 1.2470 this week. Daily GBPUSD: The triangle is getting tight, falling resistance at 1.8460, medium-term support at 1.8320. We think the support will hold, breaking the falling resistance can see the pair rise to 1.8530 initially, a break there leaves room for a medium-term rise towards 1.90. Immediate risk is a dip through 1.83 for a double-bottom at 1.8080, closing the week low would signify a break and a return to the base at 1.74 over the coming weeks or months. Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.2780 S 1.8530 K 117.40 M 1.2445 S 1.2700 K 1.8460 T 117.00 K 1.2400 K 1.2665 T 1.8415 M 116.60 M 1.2370 M 1.2630 1.8370 116.35 1.2350 1.2615 M 1.8350 S 116.10 M 1.2300 M 1.2580 T 1.8320 K 115.10 T 1.2260 K 1.2470 K 1.8250 S 114.65 K 1.2160 S S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot