Bank of England and ECB rates decision on Thursday�

The Dollar hit another 26-year low against Sterling, which has been steadily gaining ahead of an expected rise in interest rates by the Bank of England on Thursday.
The European Central Bank also meets Thursday, and is expected to keep rates on hold, but signal further monetary tightening is ahead.
Most analysts expect the Fed to leave interest rates on hold until late this year, adding that interest rates and growth differentials continue to conspire against the Dollar.
In thin trade ahead of the July 4th Independence Day holiday the main focus on the economic front was an index of US Pending Home Sales, which slumped sharply in May to its lowest level since September 2001. Investors will get a further handle on the state of the US economy on Friday with the government’s non-farm payrolls report, the most closely watched barometer of the health of the labor market. A solid reading could lure investors back to the Dollar.

News and Events:
The Dollar rebounded on Tuesday but remained near a record low against the Euro as investors eyed Central Bank meetings this week in Europe which could keep overseas yields climbing. The Dollar rose against major currencies, steadying after two sessions of sharp falls. But the Dollar hit another 26-year low against Sterling, which has been steadily gaining ahead of an expected rise in interest rates by the Bank of England on Thursday.
The European Central Bank also meets Thursday, and is expected to keep rates on hold, but signal further monetary tightening is ahead.
Volumes dwindled ahead of the Independence Day holiday, analysts said. And Stock and Bond markets closed earlier yesterday and will reopen on Thursday.
UsdChf fared better rising 0.46% to 1.2161 after a tame reading of Swiss Consumer Price inflation in the morning session. EurUsd was down -0.1% to 1.3608, still in sight of a record high just above 1.3681 hit in April. UsdJpy was barely changed at 122.46 (+0.11%). Sterling on Tuesday hit a 26-year versus the Dollar at 2.0196 ahead of the BoE’s policy meeting on Thursday. Most analysts expect the Fed to leave interest rates on hold until late this year, adding that interest rates and growth differentials continue to conspire against the Dollar.
In thin trade ahead of the July 4th holiday the main focus on the economic front was an index of US Pending Home Sales, which slumped sharply in May to its lowest level since September 2001. The Dollar showed little reaction, but coming in tandem with another report showing a modest drop in US factory orders in May, the data did strengthen a view that the economy may be struggling to regain momentum in the second quarter.
Investors will get a further handle on the state of the US economy on Friday with the government’s non-farm payrolls report, the most closely watched barometer of the health of the labor market. A solid reading could lure investors back to the Dollar.

Today’s Key Issues (time in GMT):

US holiday 4th July Independence Day

08.30 UK June Purchasing Managers Index Services 57 vs 57.2

09.00 EUR May Euro-zone Retail Sales 0.0% vs 0.2% (MoM)
09.00 EUR May Euro-zone Retail Sales 1.6% vs 1.6% (YoY)

The Risk Today:

EurUsd Remains positive in the trend started Mid-June at 1.3263. Market reached 1.3639 Monday high heading for 1.3681 April high. Focus shift on 1.3681 high from April 27th before 1.3750 trend high. A return below 1.3554 and 1.3522 former resistances will put the actual positive trend on hold. Any further set back lower than 1.3373 could open the way toward 1.3277 key support (50% retracement from 1.2872 to 1.3681 advance). Initial support holds 1.3346 last Friday high.

GbpUsd hit 2.0196 high yesterday completing the 3-week bull trend from Friday 8 June. Initial support holds 2.0100 former resistance. On the down side, a return under 1.9900 could deep toward 1.9700 and 1.9659 (50% retracement of the 1.9184 to 2.0134 advance) next support.

UsdJpy hit again yesterday 122.10 low testing through 122.24 support and former Trendline. This marks a short term double bottom. Further weakness could open the way toward 119.55 trendline; down 120.78 double bottom from 7-8 June. On the uptrend, renewed advance through 124.15 will reopen the way toward 125.57 December 2002 high.

UsdChf reversed deeply from mid-June 1.2472 high and hit Monday 1.2092 two-month low. The 3-months high 1.2472 marks the strong resistance. On the current downtrend, focus shifted on 1.1996 trend low support. Former support 1.2178 marks the initial resistance before 1.2234.

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Resistance and Support:

By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland