A. Laidi: dollaro in evidenza, eurusd verso quota 1,4020-50
Intraday Market Thught a cura di Ashraf Laidi, Chief Market Strategist di CMC Markets.
• Dollaro Usa in evidenza sulle previsioni del mantenimento del programma di riacquisto bond da 600 miliardi di dollari almeno fino a giugno
• Dow-30 sta per superare i 12.000 punti, soglia mai più rivista da giugno 2008
• Eurodollaro verso il target di $1.4020-50
USD REMAINS ABOVE KEY SUPPORT
• Markets go into this evening’s FOMC with the expectation of an upgrade in the Fed’s language while keeping the $600 bln asset purchase program intact until
• The Dow-30 is poised to break the 12K level for the 1st time since June 2008– an 85% increase from its March 2009 low
• Technicals suggest EURUSD faces the next barrier at the $1.4020-50s
London – 26th January 2010
US dollar selling accelerated in early Asia as the State of the Union Speech dampened hopes of resurrecting the Homeland Investment Act. The 2005 HIA proved USDpositive as it slashed the tax rate on US multinationals repatriated earnings. Over $200 bln of inflows was repatriated by US multinationals. While the HIA was part of the 2004 American Job Creation Act, those HIA flows were mainly used for buying back stocks, repaying debt rather than creating new employment. Markets go into this evening’s FOMC with the expectation of an upgrade in the Fed’s language while keeping the $600 bln asset purchase program intact until June. This combination of improved outlook and sustainable liquidity injection has contributed to maintaining the relentless rally in US equities.
There is talk that the Fed may signal a bottom in disinflationary pressures after the headline version of personal consumer expenditure (its preferred inflation gauge) edged up 0.1% m/m following 4 straight readings of 0.0%. Yet, as long as the more important annual core PCE remains near its all time lows of 0.8%, there is no risk of any hawkish directive any time soon. Despite the introduction of 4 new members to the 2011 FOMC line-up (Plosser, Fisher, Evans and Kocherlakota), only Plosser may be expected to dissent against prolonging QE2 but not in Q1.
Highest Winning Streak since 1995? The Dow-30 is poised to break the 12K level for the 1st time since June 2008– an 85% increase from its March 2009 low. A rise this week would be the 9th consecutive weekly gain, the longest winning streak since Mar-May 1995. The last time the index rallied for 8 straight weeks was in Mar-April 2010 before it was interrupted in the May-June selloff, which was headed off by the May 6th Flash Crash. The daily correlation between the Dow-30 and USD Index has waned from -0.89 in November to -0.59 today.
Euro Remaining Barrier at $1.40
The euro’s dynamics have improved on a combination of well subscribed EFSF bond issue (more than 8 times subscribed) and assurances that any shakedown in the Irish govt would not impact the finance bill. The euro’s gains were also magnified by yesterday’s shock contraction in UK Q4 GDP, which boosted EURGBP and onto EURUSD. Technicals suggest EURUSD faces the next barrier at the $1.4020-50s, which is the trendline resistance prevailing since July 2008. Conversely, the USD index is likely to gain stabilise near the 76 level, which is the trendline support originating from March 2008. Considering ongoing doubts over the austerity policies in Ireland and Portugal as well as the clash between solvency and liquidity questions in Eurozone banks, we do not expect these issues to help overcome the euro beyond these multiyear highs.