The Dollar Remained Strong Ahead of Rate Cuts By Major Central Banks
The euro moved sharply lower against the US dollar to 1.2720 as data released in the Eurozone saw EMU-15 consumer price inflation recede to +3.2% y/y, increasing the chances the European Central Bank will cut rates by at least 50bps. EMU-15 unemployment remained steady at 7.5% in September. Last week, the U.S. Federal Reserve cut its key rate by 50 basis points to 1%. The Bank of Japan (BoJ) followed it up with a 20 basis point reduction. This week the European Central Bank, the Bank of England and the Reserve Bank of Australia are expected to lower rates to support their struggling economies from the threat of a looming global recession. The yen was steady versus the US dollar around 98.51 yen. The British pound depreciated sharply against the US dollar as cable tested bids around the 1.6115. Data released in the UK saw the October consumer confidence index fall to -36 from -32 in September.
EUR/USD
The short term picture worsened as the euro failed to test the key resistance level at 1.3320, which is 61.8% retracement of the 1.1640- 1.6035, and which pushed the pair down around 1.2600 levels. So far first target will be the resistance at the psychological 1.3000, followed by the key 1.3320. A successful break of 1.3320 will give us a signal that the positive mid-term trend is resumed and will target 1.3680. On the contrary, the negative risk remains and on the downside support is seen at 1.2500, followed by 1.2340 and the psychological 1.2000.
EUR/USD (chart, table)
USD/JPY
The short term picture remains neutral as the pair consolidates in a narrow range near the resistance level around 98.70, which is 23.6% retracement of the 124.12-90.90 drop. Its overcoming will put the target on the next key resistance level at 103.50, which is 38.2% retracement of the mentioned drop. A successful test of 103.50 will give us a signal that the mid-term uptrend has resumed. On the contrary, the downside risk remains the rise will appear to be just a corrective one. On the downside support is seen at 95.75, followed by 90.85 and 85.00.
USD/JPY (chart, table)
GBP/USD
The short term picture remains negative as the sterling pulled back from resistance at 1.6650, which is 23.6% retracement of the 2.1150- 1.5266 drop. If broken successfully, next targets will be 1.6900 and the key level at 1.7510, which is 38.2% retracement of the mentioned drop. The downside risk remains, as far as, the pair holds below 1.7510, and its overcoming will give us a signal the mid-term positive trend has resumed. On the downside support is seen at 1.5600, followed by 1.5420 and 1.5270.
GBP/USD (chart, table)
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03.11.2008 FX daily review.pdf, 627 Kb
