• U.S. Dollar Trading (USD) strengthened last night more on sentiment rather than data results. Investors have priced in the more than likely 25bps rate cut expected to be announced late on Wednesday. However, it is the accompanying statement which will give an indication as to whether we see an end to rate cuts in the medium term that poses the most interest. A more neutral outlook from the Fed will provide investors with more confidence in the notion of a greenback recovery and may cause volatility in the market. In data released on Tuesday, U.S house prices fell at a rapid pace in February, with prices down nearly 13% from a year ago. U.S Consumer Confidence fell as forecast from 65.9 to 62.3 in April, reflecting rising energy prices, growing inflation concerns and a weak financial system are weighing heavily on Americans’ perception of their personal well-being. In share market news, the Dow Jones fell by 39 points (-0.3%), whilst the NASDAQ rose 1 point (0.1%). Oil prices slid US$3.12 a barrel to US$115.63. Looking ahead, the FOMC rate announcement is to be released late on Wednesday with expectations of a cut of 25bps to 2.00%. Q1 GDP is to be announced also, with forecasts of 0.0% growth, following on from only 0.6% growth for Q4. Chicago PMI for April is also announced on Wednesday with forecasts of 47.5 down from 48.2 for March.
• The Euro (EURO) declined yesterday, closing near its low as U.S strength and a waning Euro outlook hurt the currency. Euro Zone Retail PMI fell to 41.8 in April, suggesting the Euro has slowed somewhat since the end of Q1. The EURUSD traded at a high of 1.5663 and a low of 1.5540, before closing at 1.5561 in New York trading. Looking ahead, Euro movements will largely be dependent on data coming out of the U.S later on Wednesday with the Fed’s rate decision and Q1 GDP being announced. The Euro’s Unemployment rate for March is announced on Wednesday with forecasts of no change from its current level of 7.1%. Consumer Sentiment is also released with forecasts of -13, down from March’s level of -12. Also released, is the Euro’s Business climate for April with predictions of a drop from 0.8 to 0.7.
• The Japanese Yen (JPY) strengthened in early trading as U.S equities weakened, before the dollar found support and bounced back. Early on Wednesday the Japanese Unemployment rate for March came in slightly better than the forecasted 3.9%, seeing a decline to 3.8%. Household Spending for March decreased from 0 to -1.6, down on the predicted 0.5.The USDJPY traded at a low of 103.22 and a high of 104.35 before closing at 103.99 in New York. Looking ahead, the BoJ’s rate announcement is released on Wednesday with suggestions of no change from their current levels of 0.5%.
• The Sterling (GBP) weakened on Tuesday as support in the dollar pushed the sterling lower. Furthermore, weak data and dovish comments from BoE officials also hit the pound. UK mortgage applications showed their lowest levels since 1993 highlighting the worsening economic problems facing the UK. BoE officials sounded very cautious in their addresses on Tuesday signaling weakness in the financial system and a reasonably stagnating growth outlook for 2008 and all but signified no rate hike for the medium term. The GBPUSD traded at a high of 1.9918 and a low of 1.9668, before closing at 1.9680 in New York.
• The Australian Dollar (AUD) was reasonably resilient given the appreciating U.S dollar and ailing commodity prices on Tuesday. Aussie strength will largely depend on U.S data to be released on Wednesday with the upcoming rate announcement sure to cause movements in the market. The AUDUSD traded at a high of 0.9393 and a low of 0.9294, before closing 0.9345 in New York. Looking ahead, Private Sector Credit for March is to be released on Wednesday with expectations of no change from 0.7% m/m in February.
• Gold (XAU) dropped on Tuesday following U.S strength and falling energy prices somewhat diminished the precious metal’s appeal. Prices dropped US$18.70 an ounce to US$876.80.
• Euro – 1.5565
Initial support at 1.5510 (Apr 3 reaction low) followed by 1.5408 (Mar 25 Low). Initial resistance is now located at 1.561 (Apr 29 high) followed by 1.5707 (Apr 25 high).
• Yen – 104.10
Initial support is located at 102.68 (Apr 22 low) followed by 101.86 (61.8% retracement of the 100.03 to 104.82 advance). Initial resistance is now at 104.37 (Apr 25 high) followed by 104.82 (Apr 25 high).
• Pound – 1.9675
Initial support at 1.9668 (Apr 29 low) followed by 1.9600 (Apr 16 reaction low). Initial resistance is now at 1.9913 (Apr 29 high) followed by 1.9966 (Apr 28 high).
• Australian Dollar – 0.9335
Initial support a 0.9292 (Apr 25 low) followed by 0.9272 (Apr 18 low). Initial resistance is now at 0.9422 (Apr 25 high) followed by 0.9496 (Apr 24 high).
• Gold – 874.00
Initial support at 869.97 (Apr 29 low) followed by 873.00 (Apr 1 reaction low). Initial resistance is now at 906.50 (Apr 24 high) followed by 922.86 (Apr 23 high).