The dollar held onto overnight gains around 97.50 cents to the euro and 119.75 yen despite the uncertainty surrounding the 9/11 anniversary. US markets open two hours later today as memorial services are planned for 8:46-10:30AM throughout the country. While there are some worries as to the heightened state of emergency today, markets are expecting more volatility on Thursday and Friday. The FT reports this morning that Pres Bush will try to rouse the international community into action when he tells the UN that it has been disobeyed by Saddam Hussein's "outlaw regime". This will make Thursday's speech key to markets as dealers try to gauge the effect on building a coalition and whether or not Bush does deliver an ultimatum. Helping keep the dollar afloat were positive US equity futures. On Tuesday, US indexes rose for a third consecutive day - a feat not seen since last month's rally. And if today turns out to be a non-event, there is speculation that US equity markets may rally once more. But any rally is likely to be brief given the key data and events scheduled for Thursday and Friday. Speeches by Pres Bush to the UN, Fed chairman Greenspan to Congress, and key current account data are on Thursday. This will keep traders on their toes until the most important data on Friday, retail sales figures and consumer sentiment, are released and give markets an indication on whether consumer spending will continue.
Any rally is likely to be brief given the key data and events scheduled for Thursday and Friday. Speeches by Pres Bush to the UN, Fed chairman Greenspan, and key current account data are on Thursday. This will keep traders on their toes until the most important data on Friday, retail sales figures and consumer sentiment, are released. Speculators continue to bet heavily against the dollar but end up being disappointed. This has led to doubts over the inevitability of a dollar decline. But recent dollar gains are mainly the result of short covering, and not reflective of rising demand for the greenback or renewed confidence in equity markets. Moreover, given that September is historically the worst month for stocks, and October is known for crashes, the key factor for the dollar going forward is that US equities do not fall below July lows. This would likely induce a further selloff in the dollar given that speculators continue to bet on a falling dollar but lack a catalyst to put it in motion. Key resistance at 960 and 9,000 in the S&P and Dow will need to be broken.
EUR/USD held steady around 97.50, up from a 2-week low of 97.20, and above trendline support at 97.00. Below here would target 96.20 lows and 95.80 Fibonacci support. 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, but any rally should hold short of 99.00. USD/JPY also continues to bounce within a consolidating triangle pattern, with key resistance now at 120.15, the overnight 2-week high, keeping a cap on the upside. Failure to top this high should lead to a correction lower to 119.20. 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. USD/JPY resistance still seen at 120.30 or 121.30 highs.
The Nikkei rose for a third consecutive day 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.
GBP/USD rose to a session high of 1.5580, up from an overnight low of 1.5510. 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.
UK unemployment edged lower in August, with the claimant count falling 6.4k after falling 3.4k in July. The unemployment rate stayed steady at 3.1% and average earnings were also steady at 4% in July.//www.forexnews.com