4/2/2007 02:30 pm: EUR/$..1.3367 $/JPY..117.76 GBP/$..1.9779 $/CHF..1.2143 AUD/$..0.8168 $/CAD..1.1558
Dollar Shrugged Off Manufacturing ISM
The dollar was little changed following the release of US manufacturing ISM. The index fell from 52.3 to 50.9 in March, basically in line with the expectation of 51.1. The euro is trading in a narrow range between 1.3360 and 1.3380 during Monday US session. The market is waiting for the Labor Department employment report for more clues on the US economy and the Fed rate outlook.
As we said last Friday, the knee-jerk dollar slump on the news that US would impose new duties on imports of paper from China was overdone. The dollar today pared part of its loss. It seems the market just treat the news as a political gesture, not a threat to the dollar.
The sterling edged higher broadly on speculation that the Bank of England may surprisingly raise rates this week. Recall that two out of the three interest-rate hike since August were unexpected.
EURUSD will face interim resistance at 1.3380, followed by 1.34 and 1.3420. Additional ceilings will emerge at 1.3450, backed by 1.35. Support starts at 1.3350, backed by 1.3320, 1.33 and 1.3280. Subsequent floors are eyed at 1.3250.
GBPUSD encounters interim resistance at 1.98, backed by 1.9830, and 1.9850. Subsequent ceilings will emerge at 1.9880, followed by 1.99 and 1.9920. On the downside, support begins at 1.9760, followed by 1.9720 and 1.97. Additional floors are eyed at 1.9680, backed by 1.9650 and 1.96.
Strong Retail Sales Boosted AUD
The Australian dollar broke 0.81 handle and rose to a 10 year high at 0.8179 versus the dollar after a report showed retail sales accelerated more than expected, reinforcing expectations for a central bank rate increase at the policy meeting which will end on this Wednesday.
Yen in Consolidation
The Bank of Japan???s Tankan report released last night showed that large manufacturers sentiment fell to its weakest level since June 2006, confirming expectations that the central bank will leave interest rates unchanged in the near term after lifting them in February. The yen drifted in a narrow range under 118 level. The currency is likely to gain if speculation rises that the yen weakness may be the focus of the G7 meeting to be held on April 13.
USDJPY encounters interim resistance at 117.80, backed by 118 and 118.40. Subsequent ceilings will emerge at 118.60, followed by 119 and 119.50. On the downside, support begins at 117.50 and 117.30, followed by 117. Additional floors are eyed at 116.70, backed by 116.50 and 116.