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Dollar starts the week on a weak note…

There have been no further releases.

The following economic releases are due today:

January
Italian PPI                        (MoM)    +0.5%
Italian PPI                        (MoM)    +5.1%
U.S. Construction Spending (MoM)    - 0.7%

February
Swiss SVME PMI  
Italian Manufacturing PMI                  50.2
French Manufacturing PMI                  53.4
German Manufacturing PMI                54.0
Euro-zone Manufacturing PMI             52.3
U.K. Manufacturing PMI                     51.0
Euro-zone CPI (E)              (YoY)    +3.2%
U.S. ISM Manufacturing                     48.5

The week starts with the Dollar under pressure from the open.

Last week’s long list of negative economic releases and Bernanke’s rather blunt admission that the economy was deteriorating faster than expected has pushed the Greenback to new lows, most aggressively against the Yen and Swiss Franc.

However, the next FOMC meeting is not for 2 weeks and this will keep the market anticipating further interest rate cuts from the Fed. Most look for 50bp but some players are looking for a more aggressive 75bp.

However, there is a limit to what interest rates can achieve. Japan had a zero-interest rate policy for years but this still didn’t jump-start the economy. It was the boost in exports generated from globalization that finally pulled them out of the slump.

The mortgage relief plan and fiscal stimulus are slow out of the traps and this is compounding the problem as consumers look on with angst as jobs steadily disappear and prices keep rising along with oil which topped $102 today.

There is little on the economic calendar from the States this week except the ISM and non-farm payroll numbers and these could risk unsettling the market further. The downside will always be the risk but it is becoming a little overdone in the short term.

Europe will be releasing the month manufacturing and service PMI numbers with German factory orders and industrial production numbers to be watched for later in the week.

The ECB and BOE are also due to announce rate decisions but both have made it reasonably clear that there will be no change this week. The European economies are still holding up in the face of the credit crunch but are very vulnerable to any shock.

Thus for today we should see a little more downward pressure but the limits appear to be around 101.80 Dollar-Yen, 1.5268-1.5322 Euro and 1.0216-40 Swissie.

This should then see the market settle into corrective range trading through to Thursday’s European rate decisions and Friday’s non-farm payroll.

Note important support and resistance areas:

         USDJPY        EURUSD       USDCHF       GBPUSD
Res:  104.18-55    1.5322-50    1.0486-25    1.9971-06
Res:  103.30-52    1.5238-68    1.0373-02    1.9891-24

Spt:   102.41-60    1.5142-68    1.0300-07    1.9761-83
Spt:   101.67-82    1.5070-80    1.0216-40    1.9606-56

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Source : GFT Forex

Dollar stabilizing following the early sell-off vs the Swiss Franc & Japanese yen

Releases from Australia:    

Australia – February                                Prior    Current
AIG Performance of Manufacturing Index    49.2       51.4 
TD Securities Inflation                 (MoM)  +0.3%    +0.3%
TD Securities Inflation                  (YoY)  +3.9%    +4.0%

Following a rather shocking 8.4 point decline The AIG Performance of Manufacturing Index recorded a solid rise of 2.2 points to bring the headline index back above the 50 boom/bust level.

The group reported, “The manufacturing sector has seen more subdued activity over recent months, in part, reflecting the effects of shutdowns over the summer holiday period. However, it is clear that concerns over global economic prospects, especially in the United States, higher Australian interest rates and rising input costs have had an ongoing negative impact on the sector.”

Almost predictably there was no good news concerning inflation which ticked higher to the highest annual level in 6 years to +4.0%. Rents, vegetable prices and the cost of financial services all contributed to the rise.

TD reported, “The inflation gauge continues to show inflation on a strong upward trend. This indicates that price pressures are more broadly based than just food and petrol. Furthermore, the monthly increase pushed yearly inflation to 4.0 percent, which is well above the top of the RBA’s inflation target band.”

It is timely that the RBA are meeting tomorrow and are expected to hike rates for the second month in a row by a further 25bp to 7.25% but the market expects at least one further hike later.

The following economic releases are due today:

January
Italian PPI                        (MoM)    +0.5%
Italian PPI                        (MoM)    +5.1%
U.S. Construction Spending (MoM)   - 0.7%

February
Swiss SVME PMI  
Italian Manufacturing PMI                   50.2
French Manufacturing PMI                   53.4
German Manufacturing PMI                 54.0
Euro-zone Manufacturing PMI              52.3
U.K. Manufacturing PMI                      51.0
Euro-zone CPI (E)               (YoY)     +3.2%
U.S. ISM Manufacturing                       48.5

Friday’s trading following through into this morning has been rather strange. While the idea that we were close to a high in the Euro, probably already seen against the Pound have played through the weakness in the Dollar against the Swissie and Yen has been much stronger than anticipated.

I do have to say though that I feel the moves in the Swissie and Dollar-Yen are probably over for now and this tends to suggest we shall see that deeper pullback begin today. It should be fairly sizeable and given the current negative sentiment against the Dollar it is unlikely to be a straight line so expect there to be a good deal of choppy trading again.

The exception here may be the Pound which should be beginning the continuation of the larger downtrend. It appears to be in a small triangle right now – so wait for breach but when it does the follow-through could be quite strong.

Another currency pair that broke the mould was the Aussie which did see a large pullback and indeed to the deepest I would expect. This morning’s low at 0.9274 really needs to hold to maintain a new high.

Note important support and resistance areas:

         USDJPY        EURUSD       USDCHF       GBPUSD
Res:  105.06-49    1.5322-50    1.0486-25    1.9971-06
Res:  103.80-18    1.5238-68    1.0373-02    1.9891-24

Spt:   102.60-96    1.5142-68    1.0300-20    1.9761-83
Spt:   101.82-13    1.5070-80    1.0216-40    1.9606-56

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Source : GFT Forex

An excerpt from FX-Strategy’s Pro Commentary

 Price:                            1.5202

ELLIOTT WAVE COMMENTS

29^th February

The weekly chart sees a 66.7% Wave –v- projection at 1.5268 and a 76.4% projection at 1.5797. The latter may be too much for the structure since the 1.4437 low.

Yesterday saw a direct move to the 223.6% projection in Wave –iii- at 1.5210-19 and where Wave –c- has projected by 176.4%.

Now there is risk that we’ve seen the peak of Wave –iii- at yesterday’s high but it’s also close to the weekly 1.5268 target. Also the 261.8% projection in Wave –iii- is at 1.5322 so keep this in mind. If seen today it should provoke a larger pullback in Wave –iv-.

If we see a direct pullback in Wave –iv- keep in mind the prior Wave b at 1.5110 with a 38.2%-41.4% pullback at 1.4973-93.

50% is at 1.4921 – I doubt this target.

Ian Copsey

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Forex Market Commentary for March 3, 2008 by Cornelius Luca

GFT Daily Market Commentary

The dollar remains under pressure versus the low yielding currencies and hold its own against the high yielding ones. Expect the dollar to consolidate on a bearish bias today.

Euro/dollar

Euro/dollar struggled to a fresh record high on Friday. My model remains long since February 14, but with the pair overbought, there is a risk of a significant decline.  Reverse long positions only on a confirmed decline
 
Initial resistance is at 1.5237. Above this pivot high, resistance comes at 1.5355.  Distant resistance is now seen at 1.5575.
 
Immediate support is at 1.5105. Below 1.5040, there is further support at 1.4965.

Oscillators are rising.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Dollar/yen

Dollar/yen tumbled further into Monday to hit a three-year low.  Mixed to lower trading is likely today.

With the pair already below a line declining since November 26 at 103.30, support is now seen at 103.05. Distant support is at 102.30 from a 50-point pivot, which targets 101.80 and 102.80.

Immediate resistance is now seen at 103.70. Strong resistance is at 104.50 from a 50-point pivot that targets 104.00 and 105.00. 

Oscillators are declining.

NEAR-TERM: Bearish
MEDIUM-TERM: Bearish
LONG-TERM: Bearish

Sterling/dollar

Sterling/dollar consolidated in an in side range and made little progress since Wednesday.  My model remains long since February 21, but I like to remain square here. 
 
Immediate support is now seen at 1.9805. Below 1.9765, the next level follows at 1.9645.

Initial resistance comes at 1.9895. A break above the pivotal level at 1.9971 would signal another further rally above the 2 mark. This is followed by 2.0040.   
Oscillators are rising.

NEAR-TERM: Mixed 
MEDIUM-TERM: Bearish
LONG-TERM: Mixed

Dollar/Swiss franc

Dollar/Swiss remains under pressure - and my model remains short as well. Mixed to lower trading is likely today.
 
Immediate support is now seen at 1.0290. Below it, support is now pegged at 1.0170.     
 
Initial resistance now comes at 1.0510.  The next level is 1.0615. Above 1.0650, resistance comes at 1.0725.  
Oscillators are declining.

NEAR-TERM: Bearish
MEDIUM-TERM: Bearish
LONG-TERM: Bearish

Source : GFT Forex

Dollar starts the week with mixed performances

European releases overnight:

December                                     Forecast  Actual
Italian 2007                        GDP      +1.7%   +1.5%

January
U.K. M4 Money Supply (F)   (MoM)     +1.3%   +1.4%
U.K. M4 Money Supply (F)    (YoY)     12.9%   13.1%
U.K. M4 Sterling Lending       GBP     21.6bn   21.8bn
Euro-zone CPI                   (MoM)     - 0.4%  - 0.4%
Euro-zone CPI                    (YoY)     +3.2%   +3.2%
Euro-zone CPI Core            (YoY)      +2.0%   +1.7%
Euro-zone Unemployment Rate           7.2%     7.1%

February
German CPI                      (MoM)     +0.4%   +0.5%
German CPI                       (YoY)     +2.7%   +2.8%
Italian CPI                        (MoM)     +0.2%   +0.3%
Italian CPI                         (YoY)     +2.9%   +2.9%
Euro-zone Business Climate Indicator   0.75      0.72
Euro-zone Consumer Confidence         -12.0   - 12.0
Euro-zone Economic Confidence          101.2    100.1
Euro-zone Industrial Confidence             1.0        0.0
Euro-zone Services Confidence             11.0      10.0
Swiss KOF Consumer Confidence            1.6      1.65

Following a week which saw the European currencies benefit from the fallout in the Dollar the figures on Friday don’t really paint a particularly positive picture. Italy went into the New Year on the back of a lower than expected 2007 GDP, inflation remains high and the business outlook and confidence numbers were soft.

A hint of what may be to come was outlined in a statement from UBS, itself having to announce writedowns from subprime losses. They estimate that there may well be another $440 billion in losses to come from the current financial crisis. That is on top of the $160 billion already announced.

A telling comment on how the globalization bubble has caused looser risk standards came from Geraud Charpin, head of European credit strategy at UBS in London.

“Leveraged risk positions are a cancer in this market and the sooner it is treated the better.”

U.S. releases overnight:

January                                           Forecast   Actual
U.S. Personal Income            (MoM)    +0.2%    +0.3%
U.S. Personal Spending          (MoM)    +0.2%    +0.4%

February
U.S. Chicago PMI                                   49.7      44.5
U.S. University of Michigan Confidence     70.0       70.8

Stateside numbers were mixed. Personal income & spending and the University Michigan Confidence were marginally better than expected while the Chicago PMI was disappointingly much lower.

As a measure of the concern that some, and probably most, Fed members hold about inflation came from Poole who was pushing for the Fed to reverse the interest rate cuts as soon as they are not needed.

The implication is clear but a two-edged sword. The risk of provoking worse inflation is obviously a prime concern. However, the fact that they have (temporarily) abandoned this mandate is testament to just how bad they view the current economic position.

Friday returned mixed results for the Dollar though this morning has continued its sharp decline against the Yen and Swiss Franc but remains in sideways ranges against the Euro and Pound. At the same time it made firm gains against the Aussie and Canadian Dollars.

Frankly it seems as if the losses are overdone against the Yen and Swissie while the muted reaction against the Euro and Pound perhaps suggest there is room for a period of range trading. However, any correction would be very nervous and until the market can generate any reason to buy the Dollar any upticks will likely be nervous and erratic.

More later once the daily analysis has been done…

The following are economic releases from Asia due today:

Australia – February
AIG Performance of Manufacturing Index
TD Securities Inflation         (MoM) 
TD Securities Inflation          (YoY) 

Japan
January Labor Cash Earnings (YoY)   +0.1%
Japan Machine Tool Orders    (YoY) 

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Source : GFT Forex

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Source : GFT Forex

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Source : GFT Forex