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Mid−Day Forex Technical Report − ECB on Hold, BoE Cuts 25bps; EUR/USD & EUR/GBP Made Record Highs

Thu, Apr 10 2008, 13:27 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

ECB on Hold, BoE Cuts 25bps; EUR/USD & EUR/GBP Made Record Highs

After surging to new record high against dollar at 1.5913 and Sterling at 0.8032, Euro, retreats mildly after ECB left rates unchanged at 4.00% as widely expected. In the introductory statement in the post meeting press conference, Trichet, as widely expected, emphasized that "upside risks to price stability prevail over the medium term". The economic fundamentals of the Eurozone is still described as "sound". However, Trichet also emphasized that the financial markets turmoil is still having "unusually high" uncertainty and may last longer than initially expected.

BoE cut rates by 25bps to 5.00% as widely expected. In the accompanying statement, the committee members are clearly concerned that credit market situation is worsening and prospect for output growth abroad have deteriorated. While inflation would remain "above the target" of 2%, the committees judges that "the disruption in financial markets could lead to a slowdown in the economy that was sufficiently sharp to pull inflation below the target."

Economic data today saw UK trade deficit narrowed from a revised -7.92b to -7.49b in Feb. US trade deficit unexpectedly widened to above -60b to -62.3b. Canadian trade surplus, on the other hand, widened from revised 2.7b to 4.94b. Jobless claims in US fell sharply from upwardly revised 410k to 357k.

More Technical Analysis Reports Here

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.5721; (P) 1.5793; (R1) 1.5903; More

EUR/USD's rally from 1.5510 continues today and edges higher to to new record high of 1.5913 earlier. At this point, further rally is still in favor as long as 1.5674 support holds. However, as pointed out before, the structure of the rise from 1.5510 is still not convincing impulsive and is probably just corrective in nature. Hence, sustained trading above 1.5902 is needed to confirm that recent up trend has resumed for next target of 1.6 psychological resistance. Below 1.5672, will indeed argue that consolidation from 1.5902 is still underway and will have probably have another test of 1.5510 support before completion.

In the bigger picture, rise from 1.4309 has just missed 100% projection of 1.3360 to 1.4966 from 1.4309 at 1.5915. Though, the structure of the rise from 1.4309 suggest that there should at least be another rally attempt, probably to 1.6000 psychological resistance or above before completion. Hence, even though below 1.5342 low again will indicate that deeper correction should be seen, downside should be contained above 1.4951 resistance turned support and bring another rise. Though, below 1.4591 will dampen this view and argue that a medium term top is already in place.

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Published on  Thu, Apr 10 2008, 13:28 GMT