FX Market Takes Time to Consider Next Move; SHORT EUR/USD @1.4210 (Midday Snapshot)


There were no real surprises following the morning event risk with all of the central banks leaving rates unchanged as expected. The [B]Bank of England[/B] left rates on hold at 0.50%, the [B]European Central Bank[/B] were unchanged at 1.00%, while the [B]Bank of Canada[/B] held steady at 0.25%. Some market participants were however disappointed after the [B]Bank of Canada [/B]failed to formally introduce quantitative easing into their monetary policy. The [B]BoC[/B] did however express concern over the appreciation in the an[B] Canadian Dollar[/B]d felt that the economy and inflation were subject to [B]“considerable risk.”[/B] In his post rate decision press conference [B]ECB President Trichet [/B]reaffirmed that rates were[B] “appropriate”[/B] at current levels, but did not rule out the possibility for additional cuts. The central banker also offered more detail on the timing of the [B]EUR60B covered bond purchase[/B] [B]program[/B]. Finally, [B]staff projections[/B] were released and as expected, showed some more downward revisions to 2009 and 2010 growth forecasts. On the data front, US releases were on the whole well received, led by [B]initial jobless claims[/B] which were as expected and [B]continuing claims[/B] which were much better. In [B]Canada[/B], data was mixed, with stronger [B]building permits[/B] and weaker [B]IVEY PMI[/B] (although there were some redeeming components to the data). All major US [B]equity indices[/B] track higher by some 0.50%, while[B] commodities[/B] are also bid.



[B]Eur/Usd: [/B]A very clear head & shoulders formation has taken hold on the hourly chart with the pattern triggering earlier today before rallying back to the upside towards 1.4200. Any additional gains are however seen limited, with the greater risk for a more significant decline over the coming days back towards a measured move h&s pattern objective in the 1.3850-1.3900 area. [B]Position: SHORT @1.4210 FOR A 1.3900 OBJECTIVE, REVISED STOP @1.4365.

[B]Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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