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Intraday Forex Technical Report

U.S. Update: After BOE and ECB

Thu, Nov 5 2009, 15:49 GMT
by Valeria Bednarik

FXstreet.com Independent Analyst Team

What happened

After the so long awaited data, and usual spikes, both Euro and Gbp are barely above pre data levels against dollar, as any of both Central Bank had shock markets, keeping rates and policy accordingly to expectations.

First, BOE said Thursday that the world economy has shown signs of recovery, with a number of
emerging markets economies experiencing a strong rebound, but that financial conditions remain fragile. They kept rates unchanged and slowed the pace of bond purchases, announcing plans to increase it by 25 billion pounds to 200 billion pounds; the Committee believes that the prospect is for a slow recovery in the level of economic activity, so that a substantial margin of under-utilized resources persists, bearing down inflation for some time to come.

Pound reached an intraday high of 1.6635 after the data, from where the pair retreated to consolidate around 1.6570 area, holding a bullish tone, supported by rising stocks markets and gold.

A few minutes later, ECB left also rates unchanged, and market waited for Mr. Trichet words to send EUR/USD to the 1.4920 resistance area. The ECB president said officials will withdraw some of the emergency liquidity measures “in a timely and gradual fashion” in order to “counter effectively any threat to price stability over the medium to longer term”.

Interesting to notice, Trichet does not see improved economic performance, saying recent data has shown some strength but also weakness, capping Euro rally. Still risk appetite and dollar weakness remain strong across the board, favoring both European currencies to the upside.

What to expect

With DJIA approaching to the 10.000 level, and gold hovering around $ 1090/oz, greenback is being punished across the board; Japanese yen, the other safe haven currency is also losing some ground, yet quite limited compared to dollar weakness.

Majors likely to move a bit more during next hour or so, tending to consolidate at current levels, waiting for the last key event of the week: U.S. Nonfarm Payrolls early Friday. While market is expecting an improvement in job loses, unemployment rate is expected to the downside.

Anyway, dollar fate remains quite dark, and no doubts, attached to stocks behavior.

Published on  Thu, Nov 5 2009, 15:51 GMT