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At 9:15:00 AM US June Capacity Utilization (exp 75.7%, prev 75.5%)US June Industrial Production (exp 0.4%, prev 0.2%) At 10:00:00 AM US Fed Chairman Greenspan Senate Testimony At 1:00:00 PM US July NAHB Index (exp n/f, prev 60)
The dollar came under further pressure in London trade as US equity futures looked to send stocks lower again on Tuesday after a last minute rally barely saved it overnight. Dow futures are trading down 150 points after being down over 400 points on Monday but closing only off 45 points at 8639. Today's key concern for the dollar is how Wall Street reacts to a wealth of earnings announcements, June industrial production data and Fed Chairman Greenspan's speech before Congress, especially after Monday's speech by Pres Bush on the economy failed to inspire markets.
Lack of trust in forward and trailing earnings US earnings are trading at historical highs compared to past recessions and today's announcements could easily disappoint from a number of key companies today. Apple Computer, Caterpillar, Continental Airlines, General Motors, Intel, Johnson & Johnson, Motorola, Merrill Lynch and many financial service companies as well are due to report. Dealers will probably most react to future outlook.
EUR/USD shot to a new high of 1.1047, just shy of resistance at 1.1050 after breaking above resistance at 1.0085. Above 1.0150 lies resistance at 1.0245 before opening the way for further gains. Support is seen at 1.01, 1.0085 and 1.0045.
Even the shocking revelation today by a French judge that Bank of France Governor Trichet would have to stand trial failed to dent the euro. This may inhibit the chances of Trichet replacing ECB Pres Duisenberg and would sour the French hopes of a gentelman's agreement. The next obvious replacement would be ECB vice president Christian Noyer but there might be trouble there too given that ECB member terms are non renewable.
USD/JPY broke below 115.75 and fell to a low of 115.44 before Japanese FinMin Mizoguchi warned that the government would act if needed to stem yen strength against the weakening dollar. Support is seen at 114.50 and 114.10, the 62% retracement of the 101.25 to 135.15 rally. Resistance is seen at 116.40 and 117.20. Any intervention led boost in the dollar should be contained by resistance at 118.30 before exporters and speculators would likely push the pair back down again.
The BoJ as expected kept monetary policy unchanged with a current account deposit target of 10-15 trln yen by unanimous decision. The BoJ also reiterated its commitment to provide funds regardless of target if financial instability arises. With the Nikkei now nearing the key 10k mark, this becomes a key risk as banks saddled with bad loans would become technically insolvent.
Today's inflation data from the UK fell further than expected in June to 1.5%, well below the BoE's inflation target of 2% RPI-X. The figures aren't expected to have much impact interest rate expectations, but short sterling jumped higher as RPIX fell to the lowest level since 1975 and well down from 1.8% in May. A move below 1.5% would require a letter to the Chancellor.
Cable added to overnight gains and broke a new 26-month record with a session high of 1.5787, just shy of resistance seen at 1.58. Follow up resistance is seen at 1.5835 followed by the key 1.5915, which is the 68% retracement of the decline from the Oct 1998 high (1.7354) to the June 2001 low (1.3680). Meanwhile, support starts at 1.5640, the 38% retracement of the rally from 1.5465.
USD/CHF mirrored gains in EUR/USD after hitting overnight its lowest level since October 1999 at 1.4454. Subsequent foundation is seen at 1.44 followed by 1.4370. Long-term support stands at 1.3845-50, the 62% retracement of the aforementioned move. Any upside is seen limited at 1.47, 1.4735 and 1.4750.
US data today is expected to show the largest gain in industrial production in June this year since it rose 0.4% in March which will help bring the annual figure back from negative to near flat.