FX Weekly Update
The dollar consolidated below 78.20 and climbed over the resistance level at 78.55-60 steadily last week. In the meantime, the ADP employment report, US unemployment aid application and ISM non-manufacturing report released on 6 Sept was better than expected. The possibility of QE3 receding led the dollar to reach 79.04 against the Yen. Many investors expected that US employment rate would be good and had bought the dollar. However, NFP came in at 79,000 against an expectation of 125,000. With an extended near-zero interest rate policy we may see the dollar falling to 77's again. Nevertheless, the Japanese government may intervene around 77.50-00, a drastic fall is not expected.
Expected Range: 77.15-78.95 High possibility of falling
Although Germany opposed the decision, the ECB kept its benchmark interest rate unchanged and has decided to buy unlimited amounts of short-term government bonds. Thus, the euro was sold on profit taking and it fell from 1.2652 to 1.2561. After that, however, as investors realized that the plan is good for southern Europe, the euro skyrocketed. An under-whelming U.S. employment rate which released soon afterwards led the euro to reach 1.2818. While the trend is now euro buying, we are looking at 1.28-1.29's becoming a ceiling.
Expected Range: 1.2650-1.2950 Buy on dips and take your profit firmly.
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