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At 2:45:00 AM E-12 French Prelim May CPI M/M (exp 0.2%, prev 0.4%) E-12 French Prelim May CPI Y/Y (exp 1.5%, prev 2.0%) E-12 French Prelim May HICP M/M (exp n/f, prev 0.5%) E-12 French Prelim May HICP Y/Y (exp n/f, prev 2.1%) At 5:00 AM 6/12/2002 Germany May WPI M/M (exp n/f, prev -0.1%) Germany May WPI Y/Y (exp n/f, prev -0.5%)
The euro held onto overnight gains against the dollar and added to its yen gains in quiet Asian trade today. The single currency held close to its fresh 17-month high of 94.90 and reached a new 5-month high of 118.97 yen after breaking options around the 118 level on Tuesday. Yesterday's large losses on Wall Street will keep the dollar on the defensive, but the lack of key European data today and probable decline in European bourses could keep the euro in a consolidative mood until US trade.
EUR/USD rose to an 17-month high of 94.90 in US trade after rebounding strongly from the 94 cent mark. A dismal report from the Richmond Fed's manufacturing and services surveys, and a pick up in the German think tank's ZEW Expectations Indicator, as well as breaking news of an explosion in Tel Aviv had all contributed to renewed sell-off in US stocks, and sent the dollar lower as well.
The Dow closed at 9517, and could again dip below the key 9,500 mark like it did last week. This level is psychologically important for the dollar because the last time the Dow broke below 9,500 was the week of September 11. Therefore, dealers will be alert to a further decline on Wall Street this week which would add to investors' fears and the dollar's downward momentum.
EUR/USD has yet to break the 95-cent handle but bounced back nicely from an overnight low around 94 cents which marks both key Fibonacci and trendline support. The euro's setback initiated bargain hunting from dealers keen to buy on the dips. Support is seen at 94.70, 94.35 and 94.15 cents, which happens to mark current trendline support. Resistance is seen at the 17-month high of 94.90 followed by 95.00, 95.50 and the January 2001 high of 95.95. After that the next target would be parity with the dollar.
JPY came under further pressure today as EUR/JPY rose to a new 5-month high of 118.98 after triggering stop loss selling of the yen past 118.00. But exporter offers and general dollar weakness kept USD/JPY around 125.50. Dealers remain weary of Japan's repeated interventions which have put a rising floor under the dollar since their first intervention two weeks ago. The MoF's Mizoguchi reiterated today that he will continue to watch the Forex market closely, saying that there was no change in their position that Japan will act if necessary. But he also said Forex moves are stabilizing, indicating Japan's pleasure with their interventions thus far.
Monetary officials remain concerned about a rising yen hurting the export led recovery. But if the dollar continues to trend lower across the board, the MoF will have to accept a lower USD/JPY level. USD/JPY support is seen at 125.20 124.85 and 124.30. Resistance is seen at 125.60 and 125.95.
The BoJ's Policy Board ended its two-day meeting today and as expected kept monetary policy unchanged on with the current account target around 10-15 trillion yen.
GBP/USD is trading around 1.4729, hovering just below its 8-month high of 1.4737. The pound soared on a combination of positive data and reports that alleged Rupert Murdoch would campaign against UK membership in the Eurozone. UK industrial production rose 1.1% in April compared with the previous month's drop of 5.9%, as the annual rate improved to -4.1% from -5.9%. The remaining economic release from the UK this week will be the May unemployment rate and claimant count. Cable resistance is seen at 1.4750 and 1.480. Support holds at 1.4640, 1.460 and 1.4560.