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European and US summary

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Dollar Drifted Lower Ahead of Three Central Banks Decisions

Tue, May 8 2007, 00:41 GMT
by Yan Xu

Forexnews.com

The dollar drifted lower against the euro and sterling on diverging interest rate outlook among three central banks. The euro extended its gains against the dollar from Friday’s weaker-than-expected US payrolls report. The single currency hovers above the 1.36 handle against the dollar on Monday. Today’s currency market is quiet as trading volume is light during UK public holiday.

The Fed meets on Wednesday and is seen keeping rates steady at 5.25%. The Bank of England is expected to lift interest rates from 5.25% to 5.5% on Thursday, which will be the first time for the British rates move above those in United States since January 2006. Meanwhile, the European Central Bank is likely to leave the benchmark rates unchanged at 3.75% on Thursday. However, the market focus will be on the post-conference talk by the ECB chairman Trichet and look for any signal of a June rate increase.

The Canadian dollar is the biggest mover today. The market is attracted to test the 1.1000 key resistance. Canada building permits rose 27.4% in March, compared to a 22.4% decline.

EURUSD will face interim resistance at 1.3630, followed by 1.3650 and 1.3680. Additional ceilings will emerge at 1.37, backed by 1.3730. Support starts at 1.3580, backed by 1.3550, 1.3530 and 1.35. Subsequent floors are eyed at 1.3460.

GBPUSD encounters interim resistance at 1.9950, backed by 1.9970, and 2.0000. Subsequent ceilings will emerge at 2.0030, followed by 2.0050 and 2.0080. On the downside, support begins at 1.99, followed by 1.9870 and 1.9850. Additional floors are eyed at 1.9820, backed by 1.98 and 1.9750.

USDJPY encounters interim resistance at 120.30, backed by 120.50 and 120.80. Subsequent ceilings will emerge at 121, followed by 121.30 and 121.50. On the downside, support begins at 120 and 119.80, followed by 119.50. Additional floors are eyed at 119.30, backed by 119 and 118.70.

Published on  Tue, May 8 2007, 00:40 GMT