NEWS / Fiscal Policy, Budget

Dollar extends loss after weak ISM data.

By Jean-Claude Braha - ACM Senior Trader Yesterdays News and Events: Dollar fell yesterday, extending its losses after September US factory activity showed its smallest growth in 16 months. The weak ISM was a bit of a surprise and showed that inflation growth is slowing and the labor market is weakening. Following closely; Investors are looking for signs of a sharper slowdown in the US economy, which could force the Federal Reserve to cut interest rates in coming months. In addition, strong eurozone economic data have confirmed expectations that the ECB will raise interest rates by 0.25% two more times this year. Yesterday, Eurusd was up 0.8% from low 1.2662 to 1.2760 high. Eurjpy hit top at 150.25 from 149.75 daily low. Gbpusd was also higher by 1.10% from 1.8678 to 1.8880 daily high. GbpJpy jumped up 0.5% from 221 daily low to 222.14 daily high. Dollar was also weaker against Jpy breaking down weekly channel started at 117 to 118.15. Intraday low was 117.54. Todays Key Issues: CH September CPI is -0.2% vs +0.2% MoM and +0.8% vs 1.5% Yoy. Are due at 08:00GMT; Eurozone August Unemployment rate expected 7.6% to 7.9% vs 7.8%, Eurozone August PPI expected 0.2% vs 0.6% MoM and 5.7% vs 5.9% YoY. The Risk Today: EURUSD maintains a 5 months bearish tone, with the pattern of lower highs arguably still intact. A break through support at 1.2630 would confirm the potential for further weakness. This would pave the way for a move towards 1.2570. Key resistance remains 1.2834. USDCHF is following upside from the recent recovery from 1.2291, which also marks the key short-term support level. Next resistance comes in at Fridays high of 1.2577 where a break is required to trigger a move towards 1.2625. GBPUSD is expected to consolidate in a triangle pattern. Focus is 1.8601 where a break would pave the way for further weakness towards 1.8493 (61.8% retracement of the 1.8090 to 1.9146 rally). Look for resistance to come in at 1.8920, last week high. USDJPY is still looking at 118.50 key trendline resistance. A clear break would develop a strong bullish trend clearing the way towards 119.40. Maintain a positive stance with minor support at 117.32. Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.2880 K 1.9220 T 119.40 S 1.2800 P 1.2834 S 1.9075 M 118.50 P 1.2625 S 1.2763 M 1.8920 S 118.30 M 1.2577 M 1.2740 1.8874 117.45 1.2445 1.2630 P 1.8713 S 117.32 T 1.2370 M 1.2570 K 1.8663 M 116.06 S 1.2287 S 1.2450 M 1.8601 K 115.56 K 1.2187 T S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot