Dollar at Critical Support

* The dollar fell on Tuesday, pressured by a report that oil producing nations along with Japan, France and China were discussing replacing the USD with a basket of currencies and gold to price oil transactions. The report, although denied by the parties, pressured the greenback in this dollar skeptical environment. The USD was further pressured by Australia’s unexpected interest-rate hike, which increased risk appetite and rallied stocks and commodities. The dollar index, approaching a cycle low, is testing the 76-handle support. Gold rose to an all-time high. The S&P 500 index was up 14.26 points to 1,054.72. The yen advanced, supported by a statement by Finance Minister Hirohisa Fujii that countries should not engage in competitive devaluation. The euro gained against the greenback and pound. An unexpected decline in UK industrial production pressured sterling. The Australian dollar rallied to a 13-month high on the RBA rate hike and commodity rally.

* The USD/CAD fell on higher commodity prices and bearish greenback sentiment. The pair’s direction is continuing to be inversely related with equity and commodity prices. After failing to penetrate the diagonal resistance last week, the USD/CAD is now testing support in the 1.05-1.06 area. The Bank of Canada may be tempted to intervene to support the pair if the USD/CAD decline continues. Our long position stopped out today.



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Financial and Economic News and Comments

US & Canada

* Canada’s building permits rose a more-than-expected 7.2% m/m to C$5.02 billion ($4.72 billion) in August after a revised 10.0% m/m decline in July, according to figures from Statistics Canada.

* Canada’s Ivey PMI jumped more than expected to 61.7 in September, a fourth consecutive rise, from 55.7 in August, indicating purchases in Canada’s public and private sectors rose last month, according to the Richard Ivey School of Business and the Purchasing Management Association of Canada. The prices index rose to 55.9 from 54.2, indicating prices in September were higher than the prior month. The employment index rose to 55.9 from 47.5, showing that employment increased for the first time since August 2008.

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Europe

* UK manufacturing production unexpectedly fell 1.9% m/m in August, the largest fall since January, after a downwardly revised 0.7% m/m increase in July, data from the Office for National Statistics showed. The manufacturing index fell to 87.8, the lowest level since 1992. August manufacturing production dropped a more-than-expected 11.3% y/y. Industrial production unexpectedly declined 2.5% m/m in August after a 0.5% m/m advance in July. August IP fell a more-than-estimated 11.2% y/y.

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* UK house prices rose a more-than-expected 1.6% m/m in September, a third consecutive month-on-month rise, after a 0.8% m/m increase in August, according to a Halifax report. House prices fell a less-than-expected 7.4% y/y in the three months through September, easing the pace of decline and improving for a fifth straight month, following a 10.1% y/y decrease in the three months through August.

* Switzerland’s CPI was unchanged m/m in September after a 0.1% m/m increase in August, the Swiss Federal Statistical Office said. September CPI fell 0.9% y/y, following the prior month’s 0.8% y/y decrease.

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Asia-Pacific

* Australia’s trade deficit narrowed to A$1.524 billion ($1.35 billion) in August from A$1.783 billion in July, the Australian Bureau of Statistics said.

* The Reserve Bank of Australia surprised the markets, unexpectedly raising its key interest rate to 3.25% from a 49-year low of 3.00%. The RBA also signaled further rate hikes in the near future amid signs the Australian economy is strengthening. Australia became the first G-20 nation to raise interest rates since the beginning of the financial crisis.

FX Strategy Update




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Источник: Hans Nilsson

06.10.2009