2 September 2002, 12:17  European Forex Trading Preview

At 3:55:00 AM E-12 German Aug BME/ PMI (exp 49.5, prev 50.1) At 4:00:00 AM E-12 Eurozone Aug PMI (exp 51.0, prev 51.6) At 4:30:00 AM UK Aug M0 Prov (y/y) (exp 8.4%, prev 8.4%) UK Aug M0 Prov (m/m) (exp 0.8%, prev -0.4%) UK Aug CIPS/ PMI (exp 49.4, prev 48.8) At 6:00:00 AM E-12 Eurozone June Retail Sales (m/m) (exp -0.1%, prev 0.4%) E-12 Eurozone June Retail Sales (y/y) (exp -0.2%, prev 0.7%)
The dollar firmed in thin Tokyo trade, but key European manufacturing data and the US Labor Day holiday should keep it within a tight range until Tuesday's US PMI data. On Friday, a surge in the Chicago purchasing managers' index lifted the dollar from its doldrums following a weak consumer confidence report earlier in the week. The Chicago PMI index posted a surprising jump to 54.9 in August from 51.5 in July, indicating that Tuesday's PMI should remain above the key 50 level after falling to 50.5 in July. Therefore, markets will look out for a further deterioration in European PMI reports, with the UK expected to remain below 50, and Eurozone PMI seen falling to 51.0 in August from 51.6.
USD/JPY rose to a session high of 118.81 as the Nikkei fell for a fifth consecutive day, closing at 9521, dangerously close to 18-year lows reached earlier this year. USD/JPY is seen supported above 118.35/40, but the 119 level should prove tough to overcome. A break above here would run into further resistance at 119.65-70. Failure to overcome 119 should lead to selling targeting the 118 level before finding support at 117.72, the 61.8% retracement of the rise from the 115.55 low to the 121.32 high, followed by 117.40.
The subject of funds repatriation by Japanese institutions ahead of the end of the first half of the fiscal year ending on Sep 30th should be expected to pressure the greenback into the next 2-3 weeks. Also seen potentially weighing on the greenback this month is the continuation of earnings guidance and warnings from US corporations as well as the return of scrutiny on US corporations' financial results as the SEC-imposed deadline is set this week on companies not having certified their results last month.
EUR/USD fell to a session low of 97.98 and remains under pressure after falling below trendline support at 98.30 on Friday. Support starts at the 20-day MA of 97.68 followed by 97.50 and 97.20. Key support stands at 96.50-60. Resistance is seen at 98.20 and trendline resistance at 98.60. A break above 98.60 would likely initiate further buying targeting 98.90 and 99.10 resistance levels ahead of parity. According to the futures CFTC data from the IMM, speculators added to their net long positions in non-dollar contracts last week. Euro contracts saw a strong rise to 22,088 in net long positions from the prior week's 17,863.
Cable also tested Friday's lows around 1.5465 after falling over a cent from a three-week high of 1.5545, its highest level since August 6th. Support is seen at 1.5450 ahead of 1.5410. Resistance is eyed at Friday's high of 1.5545 followed by 1.55, the 50% retracement of the rally from 1.5143 (July 5) to 1.5866 (July 26), and 1.5586, the 38% retracement of the aforementioned move. UK PMI data today will be key for sterling with a rise back above 50 likely to spur buying, while an unexpected fall could target new lows.// /www.forexnews.com

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