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The dollar fell across the board in a repeat performance of its losses yesterday. U.S. President George W. Bush gave a speech earlier today outlining his plan to deal with the corporate governance crisis, but his words did little to sooth the markets. Investor anxieties over the accounting scandals found no solace in Bush's broad statements. Wall Street's reaction to his plan was mixed at best, and the stock market received the news badly as it accumulated more losses. Without any important economic releases today, the dollar continued its emulation of U.S. equities.
Although indicators released from Germany were hardly encouraging, the euro made headways against the dollar. EURUSD rose for the second consecutive day and came within half a cent of parity. The immediate resistance stands at the 99.50-55 level, followed by 99.70. Parity is the next key resistance level, though it would take a forceful push to move the currency to that level. Subsequent resistance seen at 1.020 the 50% retracement of the decline from euro's all time high (1.1845) to its all time low (0.8722). Support is found at 99.00, 98.40-50 and 98.15.
July German ZEW Institute's expectation indicator fell by 0.5 to 69.6, albeit beating expectations of 67.3. Still, German June unemployment came in higher than expected, and June industrial production fell by 1.3%. The IMF also cut its estimates of German GDP growth to 0.8% from 0.9% for 2002 and 2.3% from 2.7% for 2003. The rise in the euro despite weak indicators from Euroland means that the U.S. market and the dollar remain the primary target of concern for the currency market.
USDJPY broke the 118.35 intervention point, falling to a session low of 117.74. Japanese Fin Min Shiokawa tried to retract his weekend statements regarding the ineffectiveness of intervention in the currency markets and the possibility of the dollar falling as low as 115. Earlier during Asian trading hours, he reiterated the MoF's commitment to preventing a precipitous appreciation in the yen that could hurt Japanese exports. The dollar faces preliminary support at 117.55-60, followed by key support at 116.90, where the 200-week moving average lies. Resistance starts at the previous intervention level of 118.35, then subsequently at 118.80-85 and 119.
Cable hovers near today's latest 26-month high of 1.5491, which is just above the July 1999 low of 1.5485. A clear breach above it will face the next target at 1.5517--the 50% retracement of the decline from the 1.7354 high (Oct. 98) to 1.3680 low (June 01). 1.5616 stands as the next key resistance, the Mar. 24, 2000 low. Support seen at 1.5430, 1.5390-00.
The Swiss franc mimicked the behavior of major European currencies, dragging the dollar to as low as 1.4790. Support starts at 1.4810 with a stronger base at 1.4750. Key support stands at 1.47, which is the 50% retracement of the decline from the 1.128 low (April 1995), to the 1.8307 high (Oct 2000). Resistance starts at 1.5480-85, then 1.4970, followed by 1.5020. A break above it could lift momentum to 1.5100-the 38% retracement of the decline from the 1.5710 high to the 1.4738 low. Subsequent resistance found around 1.5180, which is just below the trend line extending from the 1.6168 low (June 2002) through the 1.5895 low (Jan. 2001), the 1.5590 low (Sept. 2001).
The Dow dropped 178 pts., extending its return towards the 9000 level, though closing at 9096. NASDAQ fell back below the 1400-level, shedding 24 pts. to close at 1381.
Tomorrow's data releases for the U.S. include May Wholesale Inventories, June Export Prices, June Import Prices. Markets will also turn their focus on Eurozone Q1 Labor Costs (2nd release), May German CA and Trade Balance, UK May Manufacturing Production, and UK May Industrial Production