The Dollars weak against the yen on reducing risk aversion
The US dollar rallied on Thursday to its highest level against the euro this year after the European Central Bank cut its growth outlook, raising the probability of interest rate cuts. The ECB now sees GDP growth at 1.1% - 1.7% in 2008 and 0.6% - 1.8% in 2009. The ECB’s staff raised their 2008 and 2009 forecasts for consumer price inflation to 3.4% - 3.6% and 2.3% - 2.9%, respectively. In US news, the ISM services index printed at 50.6 in August, up from 49.5 in July. Also, weekly initial jobless claims raised 15 thousand to 444 thousand and continuing jobless claims were up 6 thousand to 3.44 million. Additionally, non-farm productivity rose a revised 4.3% annualized rate in Q2 with unit labor costs off 0.5% q/q, revised down from +1.3%. Also, ADP August private sector job losses totaled 33 thousand.
The dollar, however, fell 1.1 % against as was hurt by sharp losses on Wall Street equity markets and reducing of risk-aversion.
Meanwhile, the British pound depreciated against US dollar as reached its lowest level since April 2006 as traders continued to speculate Bank of England’s Monetary Policy Committee will be forced to reduce interest rates to counter a slowing economy although it voted to keep the main repo rate unchanged at 5.0% on Thursday. Policymakers are trapped between high inflation and rapidly slowing economic growth.
EUR/USD
The short term picture remains unchanged as the euro continues to lose positions against the dollar as the pair reached the key support level at 1.4320, which is 61.8% retracement of the 1.3262 - 1.6035 rise. In the overnight trading this level was overcome and now is open a potential for a new steep decline, and a long lasting positioning below that level could even lead to a trend reversal in the mid term. The next key level on down side is seen at 1.3850, which is 50% fibo retracement of 1.1640 - 1.6035 rise. Median support is seen at 1.4020 level. On the upside resistance is seen at 1.4320, which is 50% Fibo retracement of mentioned movement, followed by the levels around 1.4460, which coincides with the trend line and 1.4650.
EUR/USD (chart, table)
USD/JPY
The dollar fell sharply against the yen, as the pair tested 106.60 level, which is 38.2% Fibo retracement of 124.12-95.75 drop and coinciding with 200-days SMA and mid term trend line. Initially the level was overcome but later the dollar succeeds to rebound. Only fell and hold on below this level could change the formed uptrend whit main resistance target at 109.90, which is 50% retracement of the 124.12-95.75 drop, followed by 113.30, which is 61.8% retracement of the mentioned movement.
USD/JPY (chart, table)
GBP/USD
The sterling continues to lose positions but this time saw technical support around 1.7600 levels. The short term trend remains extremely negative and the next main goal is the support at 1.7275, multiple bottoms registered July 2005 and February – April 2006. Median support could see at 1.7425. There is not rejected the idea of partly recovering of the pound as sentiment oscillators – stochastic and RSI are both in extremely oversold levels. On the upside, first resistance is seen at the level 1.8080, followed by 1.8485 and 1.8980.
GBP/USD (chart, table)
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05.09.2008 FX daily review.pdf, 613 Kb
