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European and US summary

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Euro Rallied on Trichet Comments

Thu, Jun 5 2008, 22:38 GMT
by Yan Xu

Forexnews.com

6/5/2008 02:20 pm: EUR/$..1.5573 $/JPY..105.74 GBP/$..1.9570 $/CHF..1.0384 AUD/$..0.9583 $/CAD..1.0193

Euro Rallied on Trichet Comments

The euro rallied broadly after ECB President Trichet delivered surprisingly hawkish comments following a widely expected unchanged rate decision.

Trichet indicated that some ECB officials argued for rate hike later this year, and the central bank is in a state of “heightened” alertness” over inflation. His comments added to expectations for a rate move on its July meeting. The euro rose sharply from around 1.54 to as high as1.5562 versus the dollar, and gained more than half a cent to a 9-day high at 0.7956 versus the sterling. Also the euro advanced against the yen to test a key resistance at 165.

As Trichet’s statements dominated the market, other data released today were largely ignored. The Bank of England also left its interest rates unchanged at 5.0%. US weekly jobless claims fell 15k to 357k and continuing jobless claims fell slightly to 3.093m. The dollar edged up initially after the data but the following Trichet’s talk erased its gains quickly.

The market is awaiting US Labor Department employment report due Friday morning. Non-farm payrolls are seen to drop 50k in May following a 20k contraction in the previous month. Unemployment rate is seen to rise from 5.0% to 5.1%. Average earnings are expected to rise from 0.1% to 0.2%.

Canada job report for May will also be released tomorrow morning. There were 19.2k job added in April and the unemployment rate was 6.1%.

EURUSD will face interim resistance at 1.5580, followed by 1.56 and 1.5620. Additional ceilings will emerge at 1.5650, backed by 1.57. Support starts at 1.5550, backed by 1.55, 1.5460 and 1.5430. Subsequent floors are eyed at 1.54.

USDJPY encounters interim resistance at 106, backed by 106.40 and 106.80. Subsequent ceilings will emerge at 107, followed by 107.30 and 107.50. On the downside, support begins at 105.50 and 105.30, followed by 105. Additional floors are eyed at 104.80, backed by 104.50 and 104.

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 1.9470. Additional floors are eyed at 1.9450, backed by 1.9420 and 1.94.

Published on  Thu, Jun 5 2008, 22:39 GMT