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World News...
Dollar Stabilizes After Ricin Scare and BoJ by
Ashraf Laidi
The dollar pared some of its earlier losses prompted by overnight
reports of the discovery of poisonous substance in a US Senate
building. The dollar was also under pressure after Japanese and US
officials downplayed the possibility of issuing that the G7 will issue
a statement on currencies at this week's G7 meeting that is different
than the one issued at the September meeting. But an intervention from
the Bank of Japan to buy dollars for yen helped stabilize the US
currency against the major units during US trade. The BoJ's action
surprised those observers who expected no action in currency markets
ahead of the G7 meeting, a forum that has shunned interference in
currency markets at the last gathering.
EURUSD backs down on renewed worries
The euro was caught up in a combination of non-inspiring remarks
from G7 ministers and an intervention by the Bank of Japan, which
ended up boosting the US dollar across the board. A warning from
outspoken Belgian Finance Minister Didier Reindeers against rapid
currency shocks, describing EURUSD at $1.30
as a threshold to a rather radical level , helped push down the
euro by half a cent from its 1.2590 perch.
Separately, ECB council member Ernst Welteke reiterated his position
on the importance of strong world growth and its impact on demand
relative to the euro's value. He also praised the low interest rate
policy emerging as a result of a strong currency. Welteke called the
recent Eurozone data encouraging.
EURUSD fell from its $1.2598 high drifting around the $1.2530s.
Support starts at 1.2460 followed with more substantial selling seen
tempered at 1.2405-10. Subsequent support stands at $1.2370, followed
by 1.2330. Key target seen at 1.2310-the 38% retracement of the
1.1374-1.2895 rise. Resistance seen starting at 1.2580-the 50-day MA.
Next target seen at 1.2612-the 50% retracement of the 1.2333-1.2895
move. Key resistance stands at around 1.2650-the trend line resistance
extending from the 1.2895 high thru the 1.2774 high.
USDJPY edges higher as BoJ can't resist temptation
An intervention by the bank of Japan, buying dollars for yen
powered the dollar by half a yen to 105.85. A series of comments from
a Fin Min official indicating that Japan shared Europe's concern over
the dollar's failed to give the dollar its required oomph, until the
BoJ succumbed to the temptation and intervened. But once again the
effect of the intervention proved to be futile as the dollar retreated
most of the intervention's gains by late morning NY. So traders proved
that the BoJ can be lured towards intervening to support the currency
even ahead of this week's G7 meeting.
Support still seen starting at 105.35-40, followed by 105.20. Initial
resistance still holding at 105.80-85 (minor trend line resistance)
followed by more substantial pressure at 106.35-40. Subsequent
resistance is lowered to 106.65-70.
Cable jumps 2 cents to $1.84
Sterling overcame Monday's losses to accumulate a 2-cent gain
after the January CBI sales index unexpectedly soared to 38 from 33.0,
its highest level in two years. The survey confirms the strength of
private demand and cements expectations of a 25-bp rate hike by the
Bank of England this Thursday. And with the ECB and the Fed expected
to stand pat on their interest rates, sterling's outlook for further
gains remains solid.
Cable shot up past the $1.83 resistance to hit $1.84. Resistance
starts at 1.8440 followed by the 1.8520 high. Support stands at
$1.8285-90-the 61.8% retracement of the 1.7823-1.8520 decline. Interim
support follows at 1.8250. $1.82 stands as next target as the 50%
retracement of the said move.
Aussie firms, RBA seen unchanged
Aussie joined the dollar selling reclaiming the 76.50 barrier. The
RBA is expected to keep its rate overnight rate unchanged at 5.25%,
the highest short-term rate in the industrialized world, along with
New Zealand's. The rate announcement is due on Wednesday at 5.30 pm.
Concerned about mounting personal, debt the RBA could afford to wait
until its CPI target is once again being tested. Upside seen limited
at 76.70 with substantial pressure at 77.15-20.
It is possible that the Aussie will succumb to renewed selling after
the decision, even as traders expect rate hikes down the year. AUSUSD
could see interim support at 76.10 followed by 75.29-cent support,
with further selling seen at 74.80--the 38% retracement of the climb
from the 69.57 low to the 78.10 high. Resistance starts at 76.65
followed by 77.20.
Last Updated: February 3, 2004 16:30 EST
Today's Related News:
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Bloomberg (Americas) Jan 09, 2004 17:22 EST
Bank of Japan Sold Yen,
Bought Dollars After Jobs Report, Person Says
Bloomberg (Asia/Pacific) January 10,
2004 06:55 EST
U.K. Pound Has Weekly
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Bloomberg (Europe) January 9, 2004
09:12 EST
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