Get Ready For Flurry Of Economic Reports And Fed Decision
April 29, 2008In the exciting currency markets, the US dollar rose to a 3-week high against the Euro and a near 2-month high against the Japanese yen last week. You might be thinking, why did the US dollar gain in strength despite weak US economic data? We saw that consumer confidence is at 26-year low, the housing market is still in a sad decline and jobs are lost instead of being created. It might be tempting to think that perhaps traders are complacent about the dollar’s prospects but there are some factors which could be supporting the dollar’s favor for the immediate term. In the case of EUR/USD, long positions in the EUR/USD were reduced after EUR/USD failed to stay above 1.6000, and from a fundamental perspective, European data seems to be weaker now, as can be seen from last week’s IFO German business sentiment index which showed the biggest monthly decline since September 2001, and also there is an increased likelihood of a Fed pause after a possible 25-bp rate cut this coming Thursday. The futures market is even pricing a 30% chance that the Fed will keep the benchmark rate unchanged at 2.25%, compared with a 2% chance a week ago. There will be many major events happening this week although there is nothing major scheduled for Monday. Look out for US GDP, manufacturing, Fed rate announcement and non-farm payrolls data in the later part of the week.
Forex Trading
If you want to dodge these event risks, intraday trading will be your best weapon. EUR/USD’s nearest resistance lies around 1.5720, and nearest support is around 1.5530-50, with another possible support cushion around 1.5480-1.5510. USD/CHF’s resistance is around 1.0430, followed by 1.0460 then 1.0500.
Sunday:
- Japan retail trade 2350 GMT
Monday:
- ECB’s Trichet, Liebscher, Wellink speak in Vienna 0700 GMT
- European Commission releases economic growth forecast 0945 GMT
- New Zealand trade balance 2245 GMT
