Mixed emotions as Euro moves higher

The Dollar’s minor outburst yesterday was not sustained. FOMC minutes indicated that the US continues to battle inflation and rate hikes in the future are not out of the question.

Carry trades are still in motion on EURJPY and EURCHF; both pairs making new highs.

News and Events:
The Dollar’s minor outburst yesterday was not sustained. FOMC minutes indicated that the US continues to battle inflation and rate hikes in the future are not out of the question. The Fed’s statement was more hawkish than expected, pointing to rising CPI due to increased energy prices. With regard to the housing market, the Fed expressed little concern over spillovers from the sub-prime mortgage market. The euro dipped to 1.3407 but quickly rallied back to 1.3430, further confirming a key support at 1.3400.

In early sessions today, traders push the euro higher before the European Central Bank’s policy announcement later today. Market consensus sees rates unchanged, however rumor is that the ECB President Trichet could point to a hike in the near term.

EURJPY no longer looks vulnerable at the key 159.60 support. With carry trading still in motion, the pair rallied to new highs reaching almost all buy stops. EURJPY high in early trading was 160.87, now settling at 160.60. A break above 161.50 (Trend line) could follow through with a short term target of 165.22.

USDJPY hit some congestion in early trading; look for a break above 119.60 to confirm a continued uptrend.

Today’s Key Issues:

GBP 08.30 GMT Visible Trade Balance (Pounds)
GBP 08.30 GMT Trade Balance Non EU
EUR 11.45 GMT European Central Bank Rate Decision
EUR 12.30 GMT Trichet Speaks at ECB’s Monthly News Conference
CAD 12.30 GMT New Housing Price Index
USD 12.30 GMT Initial Jobless Claims
USD 12.30 GMT Continuing Claims
USD 12.30 GMT Import Price Index
CAD 16.50 GMT BoC Deputy Governor Kennedy Speaks on Uncertainty and Monetary Policy
USD 17.30 GMT ICSC Chain Store Sales
NZD 22.45 GMT Retail Sales (MoM)
NZD 22.45 GMT Retail Sales Excluding Autos (MoM)

The Risk Today:

EurUsd’s focus is at 1.3480. The pair continues its bull trend with new highs and higher lows. Key support remains at 1.3400, further it would take a daily close below 1.3334 for the trend to be questioned.

GbpUsd continues its up move from 1.9591 on Monday. Traders eye the 1.9820 level to see the pair trade to 2.0000. Currently range-bound between 1.9700 support and 1.9820 resistance.

UsdJpy congestion trading between 118.75 and 119.60. Support seen at 118.44 and resistance at 119.58. Look for breaks beyond these levels for trend direction.

UsdChf: although price activity remains choppy, the pair continues to move higher within the uptrend that began on March 19th. Support is at 1.2084 and resistance at 1.2288. A break above would confirm the upwards direction.

<!--


Resistance and Support:

By James Brandt, ACM Advanced Currency Markets, Geneva, Switzerland