NEWS / Fiscal Policy, Budget

Dollar was little up as markets focus on US elections.

By Jean-Claude Braha - ACM Senior Trader Yesterdays News and Events: Market activity has been very slow on Monday, with only few economic data, ahead of midterm congressional elections (US) on Tuesday. However, most analysts expect the US election outcome will have little impact on the Dollar. It was firm against most major currencies yesterday consolidating gains by last Friday??™s strong US jobs report that bring up the view the Federal Reserve was unlikely to cut interest rates soon. Without direct link let??™s remind that ECB held rates at 3.25% last week, but is widely expected to raise interest rates by 0.25% in December. Yesterday, Chicago Federal Reserve President Micheal Moskow renewed Dollar bulls hopes for further rate increases. He said further monetary tightening might be needed to stamp out inflation. This morning, the dollar fell across the board slipped 0.6% against the Yen after Bank of Japan Governor Toshihiko Fukui said the central bank would raise interest rates by advance to avoid sharp economic swings. This comment, come after he has previously said he would not rule out a rate increase before year-end. That future credit tightening would be gradual and the central bank had no pre-determined view on the timing of the next move. Most Currency dealers believe the BoJ will next lift rates to 0.5% in January-March 2007. Federal Reserve officials also warned that they are more inclined to lift rates again than cut them from 5.25%. Todays Key Issues: Euro-zone September Retail Sales due at 10:00 GMT is expected -0.4% vs 0.7% (MoM) and 2% vs 2.4% (YoY). GB October BRC Retail Sales Monitor due at 11:00 GMT previous was 5.2%. US September Consumer Credit due at 20:00 GMT is expected $6B vs $5B. AUD RBA Rate Decision due at 22:30 GMT is expected 6.25% vs 6%. The Risk Today: EurUsd last week high 1.2800 is seen as next resistance, where a break is needed to resume bullish trend higher. Support has also been identified at 1.2683 (Friday's low). Given the importance of these two levels in a very short-term view, 1.2800 and 1.2683 are now the key near-term directional parameters. UsdChf had made a base key support at 1.2400 level last week (early Oct. low and 76.4% retracement of the 1.2291 to 1.2771 advance). The break of last Tuesday's 1.2530 former minor resistance has reinforced the bullish view and opens the way for a move towards 1.2707 (late Oct peak). A break above yesterday's high of 1.2582 could trigger the next up move. GbpUsd short term minor resistance is set at last week high 1.9137. A break of yesterday's low of 1.8950 would offset the actual consolidation and put Gbp for a deeper pullback near 1.8874 minor support. A recovery beyond the 1.9140 would offset the short-term bear trend and confirm return of the up-trend in front of BoE interest rate announcement. Till BoJ comments this morning, UsdJpy was consolidating above 118.05. It took a step down at 117.67 and could point 116.60 minor support. But, potential is now seen for a climb towards 118.50 (61.8% retracement of the 119.65-116.59 decline). This would be again, a booster for UsdJpy further advance toward 119.90 strong resistance and then 120 psychological barrier. Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.2941 T 1.9220 T 120.00 P 1.2800 T 1.2880 S 1.9144 K 119.90 S 1.2707 S 1.2800 K 1.9040 S 118.50 M 1.2582 M 1.2758 1.9036 117.74 1.2516 1.2683 M 1.8950 S 117.67 M 1.2400 K 1.2620 S 1.8874 M 116.60 M 1.2287 S 1.2450 T 1.8601 P 116.06 T 1.2185 T S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot