The euro quickly fell half a cent against the dollar in London morning trade after the German IWH Halle institue cut its German 2002 GDP forecast to 0.6% from 0.9%. The dollar rose to fresh 2-week highs in London trade at 97.55 cents to the euro and 119.40 yen as rising US equity futures point to a possible third day of gains in US indices - a feat not seen since last month's rally. But currency markets are likely to be volatile ahead of Wednesday's 9/11 anniversary (event risk) followed by Pres Bush's address to the UN, Thursday in New York, where he will try to convince voting members of the security council that Saddam Hussein is keen on acquiring nuclear weapons, has established ties with terrorists and is diabolical enough to use them against his neighbors or the US. Key current account data on Thursday followed by a speech by Fed chairman Greenspan will keep traders on their toes until retail sales figures and consumer sentiment data are released on Friday. Therefore, even if the data does not disappoint and there is no new terrorist attack on Wednesday, a relief rally will need to push the Dow and S&P back to the key 9,000 and 960 marks to avoid another possible selloff into September and October, two of the worst months for stocks, historically. Failure to do so could turn the tide on the dollar, which has enjoyed a two-month respite.
EUR/USD fell to a 2-week low of 97.55, and below here opens the way for trendline support at 97.00 before 96.20 lows. Technically, bullish optimism appears to be fading as MACD indicators on both the daily and weekly have crossed over. But be on the lookout for a possible reversal if the MACD turns higher and prices continue lower, signaling a divergence. Resistance is seen at 97.80 and 98.40, previous support and resistance.
GBP/USD fell below its overnight low of 1.5530, to 1.5520. Support is seen at 1.55 and 1.5450, which should contain the downside. Resistance is seen at 1.5550, 1.5660 followed by 1.5725, Friday's high.
USD/CHF passed resistance at 1.4910 and jumped to a high of 1.4980. Key resistance is seen at 1.5000/25. Today, SNB Chairman Roth will give a speech on the Swiss economy and on Thursday the government will release Q2 GDP figures which may give markets a clue on the state of the economy and any future interest rate cuts. A weak economy and strong franc could prompt the Bank to lower rates again, but only if the EUR/CHF falls decisively below support at 1.45/44.
The Nikkei rose nearly a mere 0.2% today after the 2% gain on Monday following the 5.1% cumulative loss last week as it hit a fresh 19-year low at 8,969. Additional selling pressure on Japanese stocks is anticipated as banks and corporations are set to sell shares in preparation for book closing at the end of September. Meanwhile the continued declines in Japanese stocks remains troubling for Japanese banks, which have to value their considerable shareholdings when they close their books at the end of the first half of the fiscal year.
The IMF's Koehler said today the BoJ should consider further monetary easing but should also adopt a neutral budget and not a new demand boosting program. He said artificially propping up stock prices is not appropriate, but favors using public funds to accelerate bank reform. BoJ's Hayami said the central bank cannot buy exchange traded equity funds as a way to boost the ailing stock market.
USD/JPY rose over one yen to a 2-week high of 119.40, after breaking trendline resistance from an ongoing triangle shaped consolidation pattern around 119.20. A breakout could target 120.30 and 121.30 highs. But failure to maintain above 119.20 could lead to a test of trendline support at 117.00. Below here would target the 113-114 levels before a possible intervention by Japanese banking authorities to avoid a further rise in their currency. ///www.forexnews.com