U.S. Dollar Trading (USD) fell on Wednesday tracking weaker equity markets as traders add to bets the Federal Reserve may cut rates by at least 25bps when it meets later this month. The major currencies gained on the back of this along with commodities. The International Monetary Fund (IMF) has trimmed its forecasts for global economic growth in 2008 from 4.1% to 3.7% citing fears of a spill-over effect from the U.S as the reason. UBS, the Worlds second largest currency trader, released commentary on Wednesday which read for a better outlook for the U.S encouraging investors to buy the dollar against the Euro as the U.S economy will recover from a mild recession in the second half of 2008, whilst hinting that Europe has probably peaked. Despite these comments, the Euro gained to come within a cent of a record high against the dollar. U.S share markets fell again on Wednesday after oil prices hit record highs, the Dow Jones ended 49 points lower (-0.4%), while the NASDAQ lost 26 points (-1.1%). Oil prices hit a high of US$112 a barrel as supply concerns remain, before closing at US$110.07, up 2.2%. Looking ahead, the Trade Balance is to be released on Thursday for the month of February with forecasts predicting a deficit of -US$57.5 billion, a similar figure to the previous months deficit of -US$58.2. Also to be released on Thursday is jobless claims. Look for ECB and BoE rate announcements on Thursday to have an impact on the greenback also.
The Euro (EURO) grinded higher on Wednesday as poor economic data coming out from the U.K and U.S, combined with strengthening expectations the ECB may keep rates unchanged at 4.0% continue to push the Euro to near record highs. Economic data released on Wednesday saw Q4 GDP revised lower to 0.4% q/q and 2.2% y/y. Germanys trade surplus improved in February to $16.4 billion Euros, outstripping expectations of a decline to $15.8 billion. This was an improvement of $0.3 billion from the previous months figures. The EURUSD traded at a high of 1.5865 and a low of 1.5685, before closing at 1.5826 in New York. Looking ahead, all the focus is on the ECB rate announcement due out on Thursday.
The Japanese Yen (JPY) strengthened slightly against the dollar despite the BoJ kept interest rates unchanged at 0.5% with a unanimous 9-0 vote, coupled with weaker U.S equity markets. The USDJPY traded at a high of 102.84 and a low of 101.50, before finishing in New York at 101.68.
The Sterling (GBP) recovered from 6-week lows against the greenback on Wednesday, edging above the key 1.97 level. However, the pound fell against the Euro to all-time lows of .8012. Industrial production did grow 0.3% for the month of February, greater than the forecast of 0.1%. However, traders are still adding to bets the BoE may announce a rate cut when it meets on Thursday. The GBPUSD traded at a high of 1.9791 and a low of 1.9653, before closing at 1.9750 in New York.
The Australian Dollar (AUD) weakened in the Asian session following poor consumer sentiment results which saw a drop in confidence by a further -1.3% to a 15-year low, before regaining somewhat in New York following weaker U.S stocks. The AUDUSD traded at a high of 0.9334 and a low of 0.9262 before recovering to 0.9292 at the close of New York. Looking ahead, the Unemployment Rate is due out on Thursday as forecasts predict a rise from 4.0% to 4.1%.
Gold (XAU) eased in the Asian session, before surging in New York following a weaker greenback causing an increased attraction towards commodities. Prices rose by US$19.50 (2.1%) to US$937.50.
Initial support at 1.5684 (Apr 9 low) followed by 1.5628 (Apr 7 Low). Initial resistance is now located at 1.5865 (Apr 9 high) followed by 1.5896 (Mar 31 high).
Initial support is located at 101.27 (38.2% retracement of the 98.56 to 102.95 advance) followed by 100.24 (61.8% retracement of the 98.56 to 102.95 advance). Initial resistance is now at 102.95 (Apr 3 high) followed by 103.59 (Mar 11 high).
Initial support at 1.9651 (Apr 9 low) followed by 1.9607 (76.4% retracement of 1.9363-2.0398). Initial resistance is now at 1.9928 (Apr 8 high) followed by 2.0048 (Apr 4 high).
Australian Dollar 0.9290
Initial support a 0.9243 (Apr 8 low) followed by 0.9177 (Apr 7 low). Initial resistance is now at 0.9323 (Apr 9 high) followed by 0.9354 (Mar 19 high).
Initial support at 900.50 (Apr 4 low) followed by 888.20 (Apr 3 low). Initial resistance is now at 935.60 (Apr 9 high) followed by 940.60 (Mar 31 high).