Dollar hits 3-month high against the yen and 6-week peak versus the euro
The dollar hit a three-month high versus the yen and traded around six-week peak against the euro, supported by diminishing expectations that the Federal Reserve will trim interest rates later this year. Comments by Richmond Federal Reserve Bank President Jeffrey Lacker yesterday signaled that the central bank sees the current rates of fed funds at 5.25% as comfortable. Analysts said investors have come to realise they had been too pessimistic about the U.S. economy outlook. Speculation of lower US rates has hurt the dollar for much of this year, driving it to a record low versus the euro last month. Because of the change in that view, market participants are now being forced to liquidate short dollar positions, The dollar reached today 121.65 Yen, highest level since Feb. 13. Dealers are now focusing on whether it will overcome 122.20 yen, this year's top hit in late January and the highest since December 2002.
Strong figures in the ZEW survey of German investor confidence yesterday didn’t help the single currency. However, they reinforced expectations that the European Central Bank will raise interest rates from the current 3.75% to 4% in June. The reason for euro failure is that investors continue to reduce long euro positions. But analysts believe the euro will remain well supported on the view that euro zone rates will keep rising.
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TECHNICAL OVERVIEW
EUR/USD (chart)
First and strong support is found at 1.3390, followed by April the 9th bottom at 1.3339. A convincing thrust through 1.3390 will likely deepen the correction. Looking upside, first resistance is 1.3530 which is 62% correction of 1.3607-1.3436, followed by the start of tis move and the historical record high at 1.3677.
USD/JPY (chart)
A very strong resistance comes into focus at 122.16 which is a major top as it is both 3-year high and it is also 62% correction of the big move 135.15-101.68. If broken next target is 123. First support is found at 120.50 which is finally broken, followed y psychological 120 and 119 where lies firm base.
GBP/USD (chart)
The pair is nearing strong support at 1.9590 bottom and a reaction before this low is more probable than not. First resistance is 1.9790 and it will take some time before it is broken. Next comes 16 May high at 1.9872 and 1.9950 which is 62% correction of 2.0130-1.9677.
USD/CHF (chart)
Support is the already broken level at 1.2220, followed by 1.21 and not convincingly broken this year level of 1.20. Strong supports are 1.2350 and 1.2435, 62% and 76% corrections respectively of the 1.2570-1.1995 fall.
AUD/USD (chart)
Aussi have consolidated and a move beyond either 0.8170 or 0.8390 will determine the next move. Support is 9 April low at 0.8148. A very strong support is the broken former double top at 0.80. Resistance is last Thursday’s top at 0.8267 where also lies 50% correction of 0.8349-0.8180. A thrust through 0.8390 will test 0.85.
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FX daily 23.05.2007, 173 Kb
