NEWS / Fiscal Policy, Budget

Dollar falls after US rates kept unchanged 5.25%

By Jean-Claude Braha - ACM Senior Trader Yesterdays News and Events: The Dollar fell after the Federal Reserve left interest rates on hold for the second straight time and suggested inflation risks are moderating. As it was widely expected by the market; the Fed kept its overnight funds rate at 5.25%; level reached in June after 17 straight increases. The Fed noted few reasons to forecast more moderate inflation and is always ready to raise rates if needed. On the European side, ECB are more vigilant in tightening credit enough to contain inflation. Some Analyst sees the ECB raising interest rates to 3.75% by mid-2007. In Asia, the Bank of Japan is not seen raising rates from actual 0.25% in the near future. Eurusd rose this morning up to 1.2725 from yesterday 1.2670 ??“ 1.2705 small range. EurJpy was little changed around 149 in between 148.35 ??“ 149.25 session. UsdJpy was pushed down in technical profit taking from its early week highest 118.29. The NzdUsd was volatile from high 0.6656 to low 0.6548 after the country posted a wider than expected current account deficit for the second quarter. Todays Key Issues: GB September CBI Industrial Trend survey is due at 10:00GMT expected -12 vs -8. US weekly Jobless Claims due at 12:30 GMT expected 310k vs 308k. CA July Retail Sales is due at 12:30 GMT expected 0.8% vs -0.2%. US August Leading Indicators is due at 14:00 expected -0.4% to +0.2% vs -0.1%. US September Philadelphia Fed Survey is due at 16:00 GMT expected 8 to 20 vs 18.5. The Risk Today: Eurusd continues to consolidate. View remains bearish while resistance at 1.2755 should holds. The next downside trigger lies at the recent 1.2640 low where a break would expose 1.2570 (76.4% retracement of the 1.2456 to 1.2941). Usdchf uptrend remains intact above support at 1.2400, in that trend, a near-term break of last Friday's 1.2640 high would pave the way for an extension towards 1.2760 (61.8% retracement of the 1.3241 to 1.1919). Gbpusd has stepped little higher breaking above 1.8920. In a more positive tone, further gains are now likely near-term, with the next key resistance at 1.9094 and 1.9146. Support holds at 1.8734 where a break could make a new bearish theme. Usdjyp was not far away of the key 118.50 key trend-line resistance early this week. But in the actual bearish tone, initial support lies at 116.97, where a break would pave the way for deeper intraday losses towards the next key support at 115.50. On the upside we continue to monitor 118.50, where a break would extend gains towards 119.40. Usdcad broke up 1.1245 resistance (50% retracement of the 1.1460 to 1.1029), and unsuccessfully attacked 1.1295 resistance (61.8% retracement). Extended gains over this level would target 1.1460. Technically, it stays bullish above 1.1160. AUDUSD maintains a bearish trend following the recent peak of 0.7717 and low of 0.7548. This could open the way for more weakness beyond last Wednesday's 0.7482 minor support to 0.7442 (61.8% retracement of 0.7269 to 0.7722) and ultimately 0.7405 trendline low. Initial resistance this morning comes in at 0.7576, yesterday's high. Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.2950 K 1.9146 K 121.07 K 1.2760 S 1.2920 S 1.9094 P 119.40 T 1.2640 T 1.2755 M 1.8920 M 118.50 S 1.2597 S 1.2724 1.8924 117.13 1.2472 1.2640 S 1.8900 S 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