NEWS / Monetary Policy

Dollar fell again after US PPI data had little impact.

By Jean-Claude Braha - ACM Senior Trader Yesterdays News and Events: The dollar gave back some of the previous two week??™s gains on Tuesday after mixed economic data. Market is waiting today CPI expecting signs of a direction change in US interest rates. The ???Zew indicator of Economic Sentiment??? dropped slightly by 5.2 points in October. Compared with minus 22.2 points in September, the indicator??™s current level of minus 27.4 points is now far below its historical average of 34.3 points. US September PPI showed mixed number; it fell -1.3% against a -0.6% forecast. This number missed, for now, to confirm investor??™s expectations for interest rates cut in the next year. In addition, the Dollar has been boosted after the Treasury Department reported an August Net capital inflows of $116.8B, sharply up from $32.9B in July and widely over the $50B forecast. The Bank of Canada kept interest rates steady on Tuesday at 4.25% as expected but revised down its economic growth forecasts and it is looking for a decline in inflation. Usdcad traded up to 1.1415 yesterday high. Eurusd traded in narrow range 1.2516 to 1.2566 not far from last Friday 1.2578 high. UsdJpy traded as low as 118.40 in late US session. Market keep pressure on UsdJpy since last Friday and we??™ve seen large taking profit. Todays Key Issues: Bank of England Minutes of October Meeting will be release at 8:30 GMT. At the same time are due; GB September Jobless Claims change expected 0k vs -3.9k, GB August ILO unemployment rate (3months) expected 5.5% unchanged, GB Average earnings (3 months) expected 4.3% vs 4.4% (YoY). Are due at 12:30 GMT; US September CPI expected -0.3% vs 0.2% (MoM) and 2.2% vs 3.8% (YoY), US September Housing Starts expected 1??™645k vs 1??™665k and US September Building permits 1??™702k vs 1??™727k. CAD September Leading Indicators due at 12:30 GMT expected 0.2% unchanged. The Risk Today: EURUSD consolidates while maintaining a bearish theme and still the focus remains on the key support at 1.2450. A break of this support would be seen as a new bearish development and will pave the way for a decline towards 1.2400 and 1.2266 (50% and 61.8% retracements of the 1.1825 to 1.2980 advance respectively). On the topside, look for last Friday's 1.2580 high and more importantly the 1.2630 pivot level to provide resistance. USDCHF bullish theme remains intact above the former resistance now support at the 1.2640 level. Focus remains on further USD gains over the near-term towards 1.2930 (76.4% retracement of the 1.3241 to 1.1919). GBPUSD gains this week are viewed as a correction ahead of resistance at 1.8901 early October high. Last week??™s low of 1.8516 marks the next key downside trigger. USDJPY dips are also being viewed as a correction putting pressure on pivot 118.50 and looking ahead of the strong support at 117.40. We still look for a break higher with the next key trigger at 119.90 last week high. USDCAD recent break of 1.1390 confirms the current uptrend with the focus now on 1.1460. Key short-term supports are 1.1350 and 1.1321 last week low. Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.2880 K 1.9140 T 121.40 T 1.2930 S 1.2630 P 1.9075 M 120.74 M 1.2800 P 1.2580 S 1.8901 S 120.00 P 1.2736 S 1.2553 1.8727 118.52 1.2663 1.2450 T 1.8601 P 118.50 P 1.2640 M 1.2400 S 1.8516 K 117.40 S 1.2400 K 1.2325 S 1.8400 T 116.06 T 1.2287 S S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot