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European and US summary

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Dollar Firm on Data

Wed, Jun 4 2008, 20:16 GMT
by Yan Xu

Forexnews.com

6/4/2008 04:00 pm: EUR/$..1.5430 $/JPY..105.22 GBP/$..1.9540 $/CHF..1.0425 AUD/$..0.9564 $/CAD..1.0180

Dollar Firm on Data

The dollar remained firm after a sharp rally yesterday in reaction to Fed Chairman Bernanke’s warning on inflation.

The currency extended its gains today as several economic reports came out better than expected. US ADP job report showed 40 jobs were added in private sector in May, beating the estimate of a 30k fall. We are awaiting the non-farm payrolls report from the Labor Department due this Friday to take the pluse of the nation’s whole job market.

Other US data released today include the first quarter productivity, which rose 2.6% versus the estimate of 2.5%, and May non-manufacturing ISM, which came out at 51.7 above the estimate of 51.0.

The euro was trading in the narrow range between 1.5420 and 1.5480 versus the dollar, and the sterling dropped to as low as 1.9527 against the dollar. The dollar rose above 105 against the yen.

The Bank of England and the European Central Bank will announce their decisions after monetary policy meeting tomorrow morning. It is widely expected that they will keep their interest rates unchanged at 5.0% and 4.0% respectively. The market will focus on the talk by ECB Chairman Trichet at post-meeting press conference. If Trichet pointed out the rising inflation issue and the euro currency level like what Bernanke talked about the dollar yesterday before International Monetary Conference’s Central Bankers panel, the expectations of an ECB rate rise by year-end will be boosted and the euro will be supported.

EURUSD will face interim resistance at 1.5480, followed by 1.55 and 1.5530. Additional ceilings will emerge at 1.5570, backed by 1.56. Support starts at 1.5420, backed by 1.54, 1.5380 and 1.5350. Subsequent floors are eyed at 1.5320.

USDJPY encounters interim resistance at 105.30, backed by 105.50 and 105.80. Subsequent ceilings will emerge at 106, followed by 106.30 and 106.50. On the downside, support begins at 104.80 and 104.50, followed by 104.30. Additional floors are eyed at 104, backed by 103.70 and 103.50.

GBPUSD encounters interim resistance at 1.9580, backed by 1.96 and 1.9650. Subsequent ceilings will emerge at 1.9680, followed by 1.97 and 1.9750. On the downside, support begins at 1.9530, followed by 1.95 and 1.9480. Additional floors are eyed at 1.9450, backed by 1.9420 and 1.94.

Published on  Wed, Jun 4 2008, 20:17 GMT