NEWS / Fiscal Policy, Budget

Dollar has ended week up as investors were uncertain about the effect of G7 meeting

By Jean-Claude Braha - ACM Senior Trader Yesterdays News and Events: The dollar gained against European currencies on Friday as traders adjusted positions ahead of the G7 meeting. The moderate 0.2% increase in August Consumer Prices Index did reinforce the idea that the Fed will keep rates on hold at 5.25% next week. Also released on Friday, the unexpected 0.1% decline in August Industrial Production confirmed some slowdown in the economy. We have seen only modest rise in September Michigan Confidence Index at 84.4, above the consensus of 84. Analysts said US data releases were not significant enough to change the trend. Investors are uncertain about the effects of G7 and IMF meeting on Currency trading this Monday. The G7 leaved his statement mainly unchanged from the previous in April. It is renewing its call on China to allow greater flexibility of its currency, which would allow the Chinese currency to rise. In addition, market is facing a rate decision form the Fed on Wednesday. Beginning of the week can bring some surprises. Eurusd was down 1.2632 Friday from weekly high 1.2753. UsdJpy went to 118.12 high on Friday. Eurjpy went up 149.86 before easing under technical profit taking and pointed Friday??™s low 148.39. Todays Key Issues: Eurozone July Industrial production due at 9:00 GMT expected 0.2% vs -0.1% MoM and 3.9% vs 4.3% YoY. US 2Q Current Account Balance is due at 12:30 GMT, -$213B vs -208.7B. US July Net Foreign Securities Purchases is due at 13:00 GMT expected $70B vs $75.1B. NAHB Sep housing Price Index is due at 17:00 GMT expected 31 vs 32. The Risk Today: Eurusd is knocking on 1.2640 which is 61.8% retracement of the 1.2456 to 1.2941 rise. As said, its penetration opens the door toward 1.2570; the next Fibonacci 76.4% retracement. Also, this would pave the way down to 1.2560. Only a significant move above 1.2755 would erase the downward pressures for now. Last week, Usdchf went above the 1.2597 resistance but failed to hold the trend through 1.2623 and toward the next resistance at 1.2760 (61.8 retracement of the 1.3287-1.1919 decline). Only a break of 1.2400 trendline support would damage the bull channel started early September near 1.2230. Gbpusd found strong resistance at Thursday's 1.8920 high. Cable eased on technical profit taking on Friday down to 1.8780 minor support. Usdjpy consolidated through last week between 117.30 and 118.20. Late Friday session, it made a new attempt at 118.16, but couldn??™t break up to 118.50 and set back into consolidation. As long as Usdjpy can hold 117.26 to 117.05 area; we should favor follow up of the bull trend through 118.50 and toward 119.40. Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.2950 K 1.9094 K 119.41 T 1.2760 S 1.2920 S 1.8920 M 118.50 S 1.2640 T 1.2755 M 1.8900 S 117.89 P 1.2597 S 1.2652 1.8806 117.88 1.2560 1.2640 S 1.8780 M 116.60 K 1.2400 T 1.2570 M 1.8610 K 115.50 S 1.2360 S 1.2560 T 1.8493 T 114.75 T 1.2310 K S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot