Forex - Dollar weakens 16-year low US Consumer Confidence

The Dollar retreated on Tuesday as a lower US consumer confidence and declining home prices raised doubts about the Federal Reserve's ability to hike interest rates to stem inflation. The dollar struggled as the Fed began a two-day monetary policy meeting on Tuesday, with analysts expecting the US central bank to hold interest rates steady at 2%. But traders will pore over the Fed's accompanying statement for clues about possible hikes later in the year.

Analysts said if the Fed uses more neutral language on the balance of risks between inflation and growth in its post-meeting policy statement on Wednesday Dollar losses will accelerate. Analysts also said the U.S. economy's continued weakness should ease markets' expectations for rate increases this year.

US short-term interest rate futures trimmed the chances of a rate hike in August to 70% from 74% after the confidence data, and analysts said that could slide further if the economy continues to show weakness.

EurUsd hit yesterday a session high of 1.5622 after US Consumer Confidence sank to a 16-year low in June. EurUsd closed 0.34% to 1.5575. UsdJpy fell 0.06% to 107.82 from session lows at 107.36. UsdChf fell 0.41% to 1.0409, with the CHF benefiting from market talk that UBS was a takeover target for HSBC. GbpUsd rose 0.33% to 1.9709.

Today's Key Issues (time in GMT):

07:15 SEK June consumer confidence -10.2 vs -1.1
08:00 NOK April Labour force survey 2.4% vs 2.4%
08:00 EUR ECB’s Trichet speaks at EU Parliament, Brussels
09:00 EUR April Euro-zone Industrial new orders -0.6% -1% (MoM)
09:00 EUR April Euro-zone Industrial new orders 1.5% -2.5% (YoY)
10:00 GBP June CBI distributive trades -17 vs -14
12:00 NOK Cenbank rate decision 5.5% vs 5.5%
12:30 USD May Durable goods ex-defence -0.5% vs -0.3%
12:30 USD May Durable goods ex-transport -0.8% vs 2.4%
12:30 USD May Durable goods 0.1% vs -0.6%
15:00 EUR ECB’s Weber speaks on financial markets and monetary policy
16:00 USD may New Home sales-units 510k vs 526k
18:15 USD FOMC rate decision 2% vs 2%
22:45 NZD Q1 Balance to GDP -7.5% vs -7.9%
22:45 NZD Q1 Current account quarterly -1.65B vs -3.41B
22:45 NZD Q1 Current account YoY -13.25B vs -13.83B

The Risk Today:

EurUsd Current trading range 1.5400 to 1.5800. Renewed weakness below 1.5400 will put the current light 2-month uptrend on hold. This may open way down to 1.5000 key level. Support holds 1.5304 13th June low. On the upside, initial resistance holds 1.5844 June 9th high. This would reopen the way up to 1.6000 Pivot point resistance ahead of key resistance 1.6200 market target.

GbpUsd Cable is still consolidating in 1.9400 – 1.9800 trading range. On the upside, psychological 2.0000 level stays into focus. On the downside, a reversal below 1.9600 might bring again focus on 1.9337 January low and 1.9105 (50% retracement of 1.7049 – 2.1162 advance). Strong support holds 1.9363 20th February and 14th May low.

UsdJpy Current 3-month uptrend holds but stays under 108.59 16th June high. Further advance would put 110.10 strong resistance (Trendline) into focus and mid January double top ahead of 111.92 early January high. Any profit taking to and return lower than 105 level might send the market back down to 100 – 104 consolidation trading range. Strong support hold 106.59 former resistance (38.2% retracement of 124.15 – 95.74 decline).

UsdChf Market is currently trading in 1.0200-1.0600 range. Early January double top 1.1191 marks strong resistance. Minor support holds 1.0305 Friday low. Initial support holds 1.0148 June 9th low. Further weakness may open the way toward 0.9637 17th March low. June 13th 1.0541 high holds initial resistance.

Resistance and Support: