NEWS / Foreign Exchange

Dollar edges higher as FOMC shows concern about inflation risks.

By Jean-Claude Braha - ACM Senior Trader Yesterdays News and Events: The Dollar edges higher against the Euro and Yen on Wednesday after minutes from the Federal Reserve??™s September policy meeting showed concern about upside inflation risks. That decrease market expectation that the Fed could cut interest rates in early 2007 amid a softer US economy. On the contrary, the Fed leaved the door open for a Fed hike, which could happen in the first quarter of 2007. From the session high, the dollar gives back some gains against Euro, Chf and Yen after news reports that a small aircraft crashed into a building in New York. Eurusd fall from yesterday high 1.2560 to 1.2503 after FOMC report and recovers some losses around 1.2525. After the news UsdChf fell to 1.2699, near daily low 1.2690, from 1.2744 high before news. GbpUsd made a double intraday low at 1.8518 before and after 1.8590 intraday high. Globally, the Dollar bas been on a six-session winning trend, boosted by data suggesting that the US economy may be in better shape than analysts had thought. UsdCad continues to decline as Canadian Bond prices followed US treasury lower. The currency has been following commodity prices, which have continued to decline, hitting Canada??™s exporting economy. Todays Key Issues: This morning German CPI came out as expected -0.4% (MoM) and +1% (YoY). US Trade Balance due at 12:30 GMT is expected $-66.5B vs $-68B. US Initial Jobless Claims (weekly) due at 12:30 GMT is expected 312k vs 302k. ECB??™s Trichet and Weber will speak in Dresden at 14:00 GMT. US Fed??™s Mishkin Speaks on Globalization in New York at 17:00 GMT. US Fed??™s Beige Book is due at 18:00 GMT. This Night; at 23:50 GMT is expected JPN Domestic Capital Goods Price Index 0.1% vs 0.2% (MoM) and 3.3% vs 3.4% (YoY). On 12 Oct, Bog Target Rate expected unchanged at 0.25%. The Risk Today: Last Friday violation of 1.2570 former support did reinforce down-trend and exposes further downside toward 1.2450 key support level. Failure to hold above this level would open the way to 1.2400 and 1.2266 (50% and 61.8% retracement of 1.1825 to 1.2980). Usdchf is expected to extend recent gains within 1.2736 (61.8% retracement of 1.3241 to 1.1919). A clear break of this level would pave the way for a climb towards 1.2930 (76.4% retracement). Short term support stands at 1.2590 (Monday low). Only weakness under 1.2400 will cancel actual bullish trend. GbpUsd 1.8601 resistance confirms the topping attitude and could unlock 1.8490 (61.8% retracement of the 1.8090 to 1.9146). The actual tone is negative below 1.8715 (Monday top) but a break of 1.8490 would expose 1.8400. UsdJpy Tuesday break of 119.40 had set the scene for further upside over the psychological 120 level. Actual supports at 119.40 and 118.50. The bullish tone will remains over 116.06. Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.2880 K 1.9144 T 121.40 T 1.2930 S 1.2630 P 1.8901 S 120.74 M 1.2800 P 1.2570 S 1.8601 K 120.00 P 1.2736 S 1.2554 1.8596 119.54 1.2688 1.2450 T 1.8490 S 119.40 S 1.2640 M 1.2400 S 1.8400 T 118.50 P 1.2400 K 1.2325 S 1.8090 K 116.06 T 1.2287 S S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot