Forex - Dollar rallies to one-month high on Oil drop and Confidence rise

Forex News and Events: The Dollar soared to a one-month high against a basket of currencies on Tuesday, benefiting from a steep drop in oil prices and an unexpected rise in US consumer confidence. Analysts said Merrill Lynch's announcement late on Monday of yet another write-down and capital-raising exercise also helped support the Dollar, as they raised hopes the turning point in the yearlong credit crisis was close. Oil fell as low as 120.42 yesterday before ending only $2.5 down at 122.19. This was the lowest since May, as signs of weakening demand outweighed a disruption to Nigerian output. A decline in oil prices tends to benefit the Dollar, as it eases some of the growth concerns.   Another positive tone came from an independent report showing consumer confidence unexpectedly rose in July, halting a six-month slide. EurUsd dropped as low as 1.5554 and was last trading at 1.5554, down 0.99%. UsdJpy rose 0.61% to 108.08 as Yen was hurt by rising Jobless rate. GbpUsd fell 0.75% to 1.9801, weighed down by British retail sales and new mortgages record low. UsdChf rose 1.19% to 1.0456. Analysts said the European, Japanese and British data was evidence that the effects of the economic slump in the United States were spreading to other regions. Second-quarter US GDP on Thursday and Friday's US non-farm payrolls figures for July will be the market's main focus later this week.

Today's Key Issues (time in GMT): 09:00 EUR July Euro-zone Business climate -0.02 vs 0.14 09:00 EUR July Euro-zone Consumer Sentiment -18 vs -17 09:00 EUR July Euro-zone Economic Sentiment 93 vs 94.9 09:00 EUR July Euro-zone Industrial Sentiment -7 vs -5 09:00 EUR July Euro-zone Service Sentiment 7 vs 9 09:30 CHF July KOF Indicator 0.96 vs 1.01 12:15 USD July ADP National Employment -60k vs -79k 12:30 CAD June Producer prices 1.0% vs 0.6% (MoM) 12:30 CAD June Raw materials prices 3% vs 3.1% (MoM)

The Risk Today: EurUsd Market broke on Wednesday 1.5800 support which lightly undermine the current 3-month uptrend. Further weakness might play in 1.5400 – 1.5800 consolidation range. Below, strong support holds 1.5304 13th June low. Key initial resistance holds 1.6000. A break up there would open the way to Trendline resistance 1.6200. GbpUsd Following yesterday drop, Cable is still set in short term 1.9800 – 2.0100 trading range. It hit 2.0158 high two weeks ago and 1.9762 low yesterday. Key level holds 2.0100 resistance. On the downside, only a return below 1.9649 might bring again focus on 1.9337 January low and 1.9105 (50% retracement of 1.7049 – 2.1162 advance). Initial support holds 1.9649 July 7th low. Strong support holds 1.9363 20th February and 14th May low. UsdJpy Recovery pushed the market up to 108 last week and 108.29 yesterday. Friday strong Dollar rebound put focus on mid-June 108.59 resistance and 110.10 strong resistance (Trendline). Further advance would open the way toward 111.92 early January high. On the downside, a return below 105 may open the way toward 102.73 support and 100 pivot point. UsdChf Recent Dollar strength pushed last week over 1.0200 and is now trading near 1.0500. This is reopening the view for a 1.0200 – 1.0600 consolidation range. Initial resistance holds 1.0480 yesterday high. Renewed weakness below 1.0200 would retest the 1.0000 pivot point and may open the way toward 0.9637 17th March low.

Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.6200 T 2.1162 S 111.92 K 1.1191 K 1.6039 M 2.0158 M 110.10 T 1.0625 T 1.6000 K 2.0100 K 108.59 S 1.0480 M 1.5605 1.9825 107.95 1.0450 1.5400 S 1.9754 S 105.00 P 1.0013 M 1.5304 S 1.9649 S 102.73 S 1.0000 P 1.5000 K 1.9337 T 100.00 P 0.9637 K S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot