www.forexnews.com
At 8:55:00 AM US Redbook (exp n/f, prev -0.6%)
The dollar surged higher on Tuesday, gaining a cent in both the Tokyo and London sessions to reach a one-week high of 98.60 against the euro and a near two-week high of 117.90 yen. US equity futures point to a strong opening and European bourses benefited from a combination of short covering and technical buying this morning in the hopes of a solid start on Wall Street. But foreign investors have been pulling money out of US markets and it remains to be seen if the dollar and US stocks will be able to remove itself from the vicious downward spiral.
With over 200 companies reporting, earnings announcements will dominate the session today. So far the majority of companies have meet or beat the Street, but this has provided little relief for the market considering the upcoming August 14 deadline for some 950 companies which will have to verify the veracity of their accounting. Fears of more companies, especially in the technology space, of capitalizing expenses like WorldCom should continue to weigh on the market until that day. Some of the companies reporting today are Amazon.com, AT&T, Bristol-Myers Squibb, Freddie Mac, Goodyear, Lucent, Metro-Goldwyn-Mayer, and UPS.
Another rout on Wall Street overnight actually may have helped the dollar as traders saw heavy selling on both Friday and Monday fail to push the dollar lower. Many dealers viewed the stalling momentum as a sign to take profits, thereby pushing the greenback higher across the board. Dealers woke up to the fact that the dollar was acting like a one-way trade for the past few months with the other currency only serving as a vehicle to sell dollars. So with little reason to buy euro or yen based on fundamentals, they got whip lashed today by dollar short covering. Some traders have also revised their short term outlook for the dollar, saying the euro could test 97 cents, while the dollar may rise as high as 120 yen in the near term.
EUR/USD shed over two cents to a one-week low of 98.60, breaking below key technical support at 99.00, which marks the 62% retracement of the rally from 97.13 to 1.0201. Technically, the first indication that EUR/USD topped out at 1.02 was a break below key support at 1.0025/30. Violation here then blew past parity, then hovered at 99.65, before coming under further pressure in London trade. The euro has now lost over 3 cents from its high of 1.02 last week and support is now seen targeting congestion around 98.00/30 and the previous low of 97.13. Resistance is seen at 99.00, 99.60 and 1.00, but should not pass 1.0030.
European data showed the continued absence of inflationary pressures as German import prices unexpectedly fell another 1.3% in June to bring the annual decline to 5.2%. The euro's steady climb against the dollar is seen bringing down oil import prices which are a significant cause of inflation in the Eurozone.
Cable followed the moves in EUR/USD and fell below 1.57, which happens to mark the 62% retracement of the 1.5615 to 1.5845 rally. A break below here would opened the way for further declines. Today's low of 1.5634 is seen as the next support ahead of 1.5615/20. Resistance is seen at 1.5650 and 1.57.
The Swiss National Bank's Blattner said today that Swiss bank secrecy laws are not negotiable, countering demands from the EU that the Swiss open up records of who has accounts there. EUR/CHF remains under pressure around 1.4550. USD/CHF rose to a one-week high of 1.4765 but needs to maintain above 1.4710, the 62% retracement of the 1.4840 to 1.4355 decline, to open the way for further gains. Resistance is seen at 1.4710, and 1.4765.
Meanwhile, persistent fears that Japanese monetary authorities may intervene to weaken the yen lent some support to the dollar which soared to a near 2-week high of 117.91, above last week's high of 117.30 and well above the 17-month low of 115.50. As long as the dollar can maintain above 117.30 today's gains may not have been in vain. Resistance is seen at 118.00, 118.30 and 118.60/65. Support is seen at 117.30, 117.00, 116.65, 116.00/05 and 115.50.
A barrage of comments from officials today also tried to talk up Japanese stocks in an effort to keep the Nikkei from plunging below the key 10k mark. EcoMin Takenaka said the direct impact of US stock price falls on Japan's economy was not serious and added that the US economy, supported by strong productivity gains, was stronger than the stock market suggested. FinMin Shiokawa agreed that Japan's stocks and yen are resilient despite falls in US stocks, but added that the government should study public fund injection to help the failing bank sector.