Euro aiming for new highs / Market awaits Bernanke speech

Fed Chairman Bernanke speech key today as investors looking for confirmations of rumors that the US is still fighting inflation, leading to believe there is no reason for a rate cut. Key points in his speech will be inflation versus slower economic growth.

Look for the dollar to bounce back in the short-term if street rumors about inflation are correct. However, it’s hard to go against the trend; the Euro and Cable are still aiming for new highs, unless, of course major support levels are broken and close below.

News and Events:
The Euro slipped in early trading from new highs yesterday at 1.3457 due to market expectation that US central bankers continue to fight inflation decreasing the likelihood that the Fed will lower interest rates. Both Fed Chairman Bernanke and regional President Lacker speak today on two key points: economic growth and inflation. For how long interest rates will remain at their current level remains to be seen.

The GBP continued its upward strength on the UK’s intention to repatriate British corporate profits tax-free. The cable broke to 1.9816 in early trading. Both the Euro and Cable look to be range-bound throughout the day, awaiting any guidance on inflation from the US later today.

Yesterday, the Dollar lost considerable ground on concerns of a cooling domestic housing market. The dollar did not get any help after Washington announced two policy shifts: the US filed a piracy suit against China to the WTO, and slapping tariffs on cheap goods such as paper, breaking a 23 year old stature.

Today’s Key Issues:

GBP 13.30 GMT: Leading Indicator Index (MoM)

USD 13.30 GMT: EIA Crude Oil Stocks

USD 15.45 GMT: Federal Reserve’s Lacker speaks to Economists in North Carolina

USD 17.00 GMT: FOMC Minutes (from March 20-21)

USD 17.00 GMT: Monthly Treasury Budget statement

The Risk Today:

EurUsd broke 1.3450, hitting options and buy stops in the range all the way to a high of 1.3457 and recently recessed to 1.3420. Intra-day support remains at 1.3400 while resistance is intact at 1.3460 for the day.

GbpUsd broke through its month resistance of 1.9780 trading up to 1.9816. We are range-bound now between a support of 1.9760 and resistance of 1.9800. We are in an uptrend, therefore a break above 1.9816 and a daily close above 1.9830 would confirm a bullish continuation.

UsdJpy continues its range bound trading since the holidays, bouncing between it’s support at 118.73 and resistance at 119.43. Look for breaks at these levels later today.

UsdChf long-term flag formation continues. In the long run, look for breaks in the major trend lines for indication of trend continuation, or not.

Gold bears looking for a correction are not celebrating. The precious metal continued its bull trend from $656 /oz, breaking out of the $670 to $677 holiday range. The drop in the US dollar and high tensions between US with Iran and China keep the safe haven investment bull market intact. Target: $690 with a possible breakout to $700.


Resistance and Support: