Forex - Dollar hit its highest against Euro since January

Forex News and Events: The Dollar rose slightly on Wednesday and touched it’s highest against the Euro since January, on growing expectations the US economy would outperform that of Europe. It briefly extended its gains versus the Euro after a government report showed US factory orders rose more than expected in July, adding to signs of resilience in the US economy. Wednesday’s Euro-zone data underscored a weakening economy in the region. Retail sales in July fell and other reports confirmed the Euro-zone economy shrank in Q2. Yesterday, EurUsd was 0.19% up at 1.4516 after hitting a low of 1.4386 intraday; it’s lowest since January 22nd. GbpUsd fell as low as 1.7668, before recovering slightly after data showing an improvement in the UK services sector. GbpUsd last traded down 0.28% at 1.7750. UsdChf ended 0.27% lower after hitting 1.1172 intraday high. UsdJpy traded 0.13% lower at 108.30.   A further drop in oil prices, which tumbled this week after Hurricane Gustav left energy facilities in the Gulf of Mexico mostly unscathed, also benefited the Dollar. Oil last traded down 0.73% at 109.37 a barrel. Analysts said investors were increasingly getting on board with the Dollar as a safer place to allocate cash compared with currencies whose countries were further behind in terms of economic readjustment in the wake of the global credit crunch. The European Central Bank and the Bank of England will issue separate interest-rate decisions today and both are expected to keep rates on hold. The ECB has long said its main concern is taming inflationary pressures and that it will tighten policy if price risks remain high.

Today's Key Issues (time in GMT): 07:30 DKK July Industrial production 1.9% vs -3.2% 08:00 SEK Riksbank rate 4.75% vs 4.5% 08:00 GBP August Halifax house prices -1.8% vs -1.7% (mom) 08:00 GBP August Halifax house prices 3m/y -10.9% vs -8.8% 10:00 EUR July Germany Industrial orders 0.4% vs -2.9% (mom) 11:00 GBP September BoE rate decision 5% vs 5% 11:00 EUR September ECB rate decision 4.25% vs 4.25% 12:15 USD weekly ADP National Employment -30k vs 9k 12:30 USD weekly Initial Jobless claims 425k vs 425k 12:30 USD Q2 Labor costs revised 0.1% vs 1.3% 12:30 USD Q2 Productivity revised 3.5% vs 2.2% 14:00 USD August ISM Non mfg PMI 49.5 vs 49.5 14:00 USD August ISM Non mfg Business 50 vs 49.6 23:30 JPY Q1 Business capex 2.5% vs -4.9%

The Risk Today: EurUsd Market dropped as low as 1.4386 yesterday. Further weakness will put the focus on strong support 1.4366 22nd January low. On the upside, only a return over 1.5000 and 1.5500 will release actual pressure and put key initial resistance 1.6000 into focus. Still a break up there would open the way to Trendline resistance 1.6200. GbpUsd Cable dropped to 1.7668 low yesterday. Early week sharp move broke 1.7936 19th April high. Strong support holds 1.7251 3rd April low. On the upside, initial resistance holds 1.8795 last 2-weeks high. Former support 1.9363 holds also strong resistance. Key level holds 2.0100 resistance. UsdJpy Last 6-weeks recovery pushed the market up to 110.67 high 3-weeks ago. Further advance would open the way toward 111.92 early January high. On the downside, last week return below 108.59 and 108.14 supports placed market near the 6-month lower trendline support. Further pressure toward 107.50 level and may open the way toward 105 pivot, 102.73 support and 100 pivot point. Initial support holds 107.62 Monday low. UsdChf Market rose as high as 1.1172 yesterday. Initial resistance holds again 1.1107 13th February high. Strong resistance holds 1.1593 December 2007 high. On the downside, initial support holds 1.0863. Only renewed weakness below 1.0500 and 1.0375 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 1.6000 K 2.0100 K 111.92 K 1.2153 T 1.5500 P 1.9363 S 110.67 M 1.1191 K 1.5000 S 1.8723 M 109.18 M 1.1072 M 1.4520 1.7815 108.40 1.1035 1.4388 M 1.7668 M 107.50 M 1.0863 S 1.4366 S 1.7500 S 105.00 P 1.0500 K 1.4310 S 1.7251 S 102.73 S 1.0000 P S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot