Mixed figures from the US economy sent the EURUSD a little higher yesterday. Today the market has been fairly choppy ahead of the ECB rate decision tomorrow and Friday's Job Report from the US.

MAJOR HEADLINES – PREVIOUS SESSION

EURUSD

Yesterday the data from the US economy were mixed, as the Unit Labor Costs and Nonfarm Productivity came out above expectations while the Pending Home Sales and Factory Orders disappointed. We tend to focus the most on the latter two as main movers despite the prior figures should be USD-supportive as they are growth and we have not seen the same number in the Factory Orders since July 2000. The Pending Home Sales came out at -4.1% vs. expectations at -1.2% - the worst figure since July 2006. Today the ADP report will be in focus, released at 13:15GMT and also Fed's Beige Book tonight will attract the markets' attention. Most important event for the USD will be the Job Report on Friday, where especially the Nonfarm Payrolls will be the key data event. Consensus in the market is at the moment at 95K. We see that risk is to the downside and on back of the other data from the US economy, we are bearish on the USD. At the same time, we are suspecting the ECB for reinforce the 'strong vigilance' theme and see rates 25bp higher to 3.75 pct. To wrap up, we are buying EURUSD at 1.3110/30 with a stop at 1.3050 offer, targeting 1.3370.

Rates

From Yesterday:

GBP

The British Pound regained some of yesterday's losses on back of the positive spill-over effects from the stock and fixed income market. In the latter, the UK bonds extended losses as an auction of 10-year gilts drew below-average demand. The yield on the 10-year gilt climbed 4 basis points to 4.79 percent in London. Yields on two-year gilts gained 3 basis points to 5.28 percent, having fallen to their lowest in almost two months yesterday. Our view on the GBP is still on the bearish side as the rate outlook is far from GBP-supportive. In the GBPUSD, we have seen a double top and the break of 1.9180 will definately open up to the downside.

Note: the support/resistance levels used in the matrix's of this document are levels derived from yesterday high, low and close. Reference in the text to other support/resistance levels will occur.

Euro/US Dollar

( 1.3137 - 12:55 GMT, Mar 07, 2007 )

Support:

  1. 1.3050 fibo support.
  2. 1.2870 lows from January 07.
  3. 1.2765 wave support and start of the Nov. 06 uptrend.

Resistance:

  1. 1.3170 - fibo support.
  2. 1.3370 - Prior highs.

British Pound/US Dollar

( 1.9288 - 12:55 GMT, Mar 07, 2007 )

Support:

  1. 1.9260 - base support in Jan. 07.
  2. 1.9180 - old top from mid Nov. 06.
  3. 1.9075 - brake out level from Nov. 06.

Resistance:

  1. 1.9410
  2. 1.9680 - resistance at the current wave
  3. 1.9916 highs from 07.

US Dollar/Japanese Yen

( 116.31 - 12:55 GMT, Mar 07, 2007 )

Support:

  1. 115.15 - current wave low.
  2. 114.53
  3. 114.00

Resistance:

  1. 117.48 - 200 MA
  2. 117.89
  3. 118.40