Weak Data, Housing Concern Weigh on Dollar
Weak economic data, rising oil prices, and housing concerns set the tone for the dollar recently. The dollar extended its loss against the euro and sterling after US Conference Board reported that its consumer confidence index fell from 112.5 to 107.2 in March. The euro hovers above 1.33 against the dollar, and the sterling traded around 1.9670.
Fed Staffer said today that subprime mortgage market is self-corrected, but the Fed remains concerned. With sharp drop in home sales and rising number of foreclosures, people are worried that the meltdown of subprime mortgage sector may spread into the broad economy.
Cleveland Fed President Pianalto stated that the Fed was monitoring inflation as it saw a risk that it will not moderate as much as expected. However, yesterday??™s weak new home sales and today??™s consumer confidence decline reinforced market expectations for a Fed rate cut later in the year.
The market will focus on the Federal Reserves Chairman Ben Bernanke??™s Congressional testimony starting 10AM EST tomorrow. The Fed dropped its reference to ???additional firm??? in its monetary policy in last FOMC meeting.
GBPUSD encounters interim resistance at 1.97, backed by 1.9720, and 1.9750. Subsequent ceilings will emerge at 1.9780, followed by 1.98 and 1.9830. On the downside, support begins at 1.9650, followed by 1.9620 and 1.96. Additional floors are eyed at 1.9570, backed by 1.9550 and 1.95.
USDJPY encounters interim resistance at 118, backed by 118.30 and 118.50. Subsequent ceilings will emerge at 119, followed by 119.30 and 119.50. On the downside, support begins at 117.50 and 117.30, followed by 117. Additional floors are eyed at 116.80, backed by 116.50 and 116.
Euro Boosted By Germany IFO
The euro was boosted after Germany IFO survey showed unexpected rises in both current conditions and outlook of the economy. The IFO headline index rose slightly to 107.7 in March, beating the forecast of 106.5. The current Conditions index rose from 111.6 to 112.4, and the Expectations index rose to 103.2. IFO said today that the economic upswing is strong and robust.
ECB council member Nicholas Garganas said in an interview today interest rates have not peaked yet. Another ECB policy maker Klaus Liebscher said the central bank will act if inflation risks rise. Hawkish officials??™ comments boosted expectations for another rate hike, giving the euro a firm support today.
EURUSD will face interim resistance at 1.3350, followed by 1.3380 and 1.34. Additional ceilings will emerge at 1.3420, backed by 1.3450. Support starts at 1.33, backed by 1.3280, 1.3250 and 1.3230. Subsequent floors are eyed at 1.32.