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At 8:30:00 AM US Q1 GDP q/q adv (exp 5%, prev 1.7%) US Q1 Final Sales (exp 1.5%, prev 3.8%) US Q1 Implicit Deflator (exp 1.5%, prev -0.1%) At 8:45:00 AM US April Univ. of Michigan Sent. Final (exp 94, prev 95.7)
The dollar treaded water today ahead of the highly anticipated release of US Q1 GDP. Expectations vary widely around the consensus expectation of 5%, but all forecasts see a sharp gain stemming from a huge inventory rebuilding after the sizeable correction in the previous quarter. While this appears dollar positive, the market has already discounted the surge in GDP and is instead worrying about where the US will get its next strong surge in growth.
Uncertainty over the sustainability of the US recovery has weighed heavily on the dollar lately and made US equities look overvalued. Therefore, solid growth in the first quarter could be a disappointment if the market doesn't see it as sustainable. In the end, as Greenspan has stated numerous times, the economic recovery comes down to increased business investment and strong final demand. That is something the market is still waiting for and until it sees that, the dollar could continue to suffer.
Europeans came gunning for the dollar again today, driving it down across the board, in what looked to be a repeat of yesterday's aggressive dollar selling. But the market was reluctant to push the dollar through further technical levels until after the GDP release at 8:30 AM is accounted for.
The other data to be watched today is the University of Michigan Sentiment survey which expected to edge up to 94.5 in the final April reading from the preliminary 94.4, but below last month's 95.7.
EUR/USD rose to a new 3-month low of 89.96 against the euro, but failed to break the 90-cent ceiling and subsequently fell to a day's low of 89.63 and has since remained rangebound between 89.63 and 89.96. EUR/USD support is seen at 89.50 area (89.47 is 61.8% of 89.20 to 89.96) followed by the region between 89.17 (61.8% of 88.70 to 89.96) and the previous high of 89.22. If that holds, the next move should be higher. Resistance is seen at 90-cents followed by 90.40 (61.8% of 93.35 to 85.63) and trendline resistance at 91.10. Only a break below 88.70 would call the current bull into question.
UK GDP came in below estimates at 0.1% in Q1 vs estimates of 0.4% and well below trend after 0% in 01Q4 and just 0.4% and 0.5% in Q3 and Q2. That puts annual growth at 1.0%, vs estimates of 1.4%. Sterling fell to a day's low of 1.4508 after the news, down half a cent on the day from earlier peaks around an overnight 3-month highs of 1.4558 which matched this year's high. Support is seen at 1.4500, 1.4453 (38.2% of 1.4283 to 1.4559) and 1.4434 which marks both micro-term trendline support and key Fibonacci support.
A break of 1.4558 would target last December's high of 1.4605 but should not rise above trendline resistance at 1.4630. That level should mark an end to the pound's almost 3-month advance from 1.4045 and sterling could then reverse course and target the 1.44 mark ahead the 1.4250/55 level. Technically speaking, any additional longs taken around current highs should be met with caution as sterling is expected to be topping in the 1.4525-1.4630 area.
SNB's Roth said today he sees a gradual acceleration of Swiss economic growth in the next few months. He said a CHF-related easing could threaten price stability. This reduces the incentive for traders to fear the SNB lowering rates even though they have voiced their discomfort with a rising CHF.
USD/CHF failed to regain the 1.63 level and slid to a new 2002 low for the second straight day at 1.6267 before recovering back above 1.63. Support is seen at 1.63 followed by 1.6267, 1.6245, 1.6210 and 1.6165, which marks long-term trendline support. This should prove to be a bottom for USD/CHF and from here a large rally from this level could take hold. USD/JPY rose to a day's high 128.90 in Tokyo after Japanese officials questioned the yen's current strength but the dollar's rise was muted by Japanese selling ahead of next week's Golden Week holidays. The dollar has since settled around 128.42 (61.8% of 128.15-128.90). Look for either a break above 128.90 for a bullish signal or a fall below the overnight 6-week low of 128.15 for a resumption of the bear after today's release. Support is seen at 126.15/00 followed by 126.85 and this year's low of 126.35. Resistance is seen at 128.90 and 129.55.
Japan's Finance Minister Shiokawa said he was watching exchange rate movements with "great interest", while senior finance ministry official Zembei Mizoguchi repeated that there were no new factors warranting the yen's rise. FX chief Kuroda also spoke again today saying that Japan's yen policy had not changed, but dealers had expected a stronger stance from the three and are now wondering why Japan hasn't taken a more aggressive stance. This is leading the market to suspect that the risks of actual intervention are relatively limited keeping a limit to any gains. But a break back over the 129.55 mark (61.8% of 130.50-128.15) would help quiet those fears.