Make decisions after data release…Rate dynamics and recommendations on USD-CHF and USD-CAD. by OpenForex.com

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Make decisions after data release…Rate dynamics and recommendations on USD-CHF and USD-CAD.

08:58 08/04/2004

Make decisions after data release…Rate dynamics and recommendations on USD-CHF and USD-CAD. Powerful option barrier keeps pushing EUR-USD from key support at 1,2000. Record rise of oil prices might result in consumer spending reduction and decrease in demand for goods of traditional world exporters. The most vulnerable countries here are industrial countries that have no own fuel resources. For example, practically all oil that is consumed by Japan is imported. Analysts from the country of the Rising Sun warn that there is direct connection between oil prices rise and Japan’s economy and that, in current situation, stock exchange fall is inevitable. Let us remind that yesterday, crude rose to $44,24 a barrel in New York, which is the maximum since 1983. Note that compared to recent precedents of uncontrollable rise in oil prices, the president of OPEC Purnomo Yusgiantoro warned the world community that the producer’s cartel would not be able to increase oil extraction at the pace that was necessary for satisfying world demand. For example, Standard Chartered Bank economists think that 10% rise in oil prices will result in 6% weakening of the yen against the dollar. Yesterday, the dollar weakened its positions against the European currencies following governmental data that showed personal spending reduction compared to market forecasts. Besides, precious metals’ rate rise, Australian, New Zealand and Canadian dollars’ rate hike put the pressure on the rate of American currency. For example, gold rate rose from 388.60 to 394.00 dollars per ounce during American trades yesterday. Once again, the main intrigue is expected around the possible interest rate hike at the FOMC FRS U.S. meeting that is scheduled for August 10. If this week’s data show economic growth acceleration in the U.S., the probability of raising base rate target 0,25% will increase. 22 primary dealers of the U.S. Treasury bonds forecast that FRS will raise interest rate target to 1,5% per annum at the August 10 meeting. The majority of those dealers say that the rate will rise to 2% by the end of this year. Michael Woolfolk of the Bank of New York says: “Two percent is extreme point for the dollar, as in this case the rates in the U.S. and Europe will equal”. The following important data are to be released prior to FRS meeting: Non-farm payrolls, the results of the Bank of England meeting, Friday Labor market review in the U.S. in July. Today, we should pay attention to two American economic indicators that are scheduled for 14:00 GMT: - ISM services index in the U.S. in July (the forecast is 63.0, previous value was 59.9)’ - Factory orders in the U.S. in June (the forecast is +0.9%, previous value equaled –0.3%). Recommendations: in case data are higher than forecasted, we recommend immediately opening dollar “longs”, as there will remain practically no chances for keeping key resistance at 1,2835-45 on USD-CHF. If data are weak, that might bring the rate to some correction (for example, to long-awaited decline to 1m2600), which is extremely necessary now for further long-term rise of the rate. The situation is quite different with USD-CAD. In order to prove its ability for further steady rise, the rate must pass the level of 1,3350 and 1,3385 later on. Let us remind that the recent statements made by the Bank of Canada manager do not contribute to weakening of the national currency. Recommendations: in case data are higher than forecasted, we recommend immediately opening dollar “longs”, as there will remain practically no chances for keeping key resistance at 1,2835-45 on USD-CHF. If data are weak, that might bring the rate to some correction (for example, to long-awaited decline to 1m2600), which is extremely necessary now for further long-term rise of the rate. The situation is quite different with USD-CAD. In order to prove its ability for further steady rise, the rate must pass the level of 1,3350 and 1,3385 later on. Let us remind that the recent statements made by the Bank of Canada manager do not contribute to weakening of the national currency.

The forecast was created by trans1.