NEWS / Foreign Exchange

The euro rises across the board

4/5/2007 04:00 pm: EUR/$..1.3422 $/JPY..118.71 GBP/$..1.9706 $/CHF..1.2153 AUD/$..0.8192 $/CAD..1.1504

Euro Rallies on ECB Rate Outlook

The euro rises across the board as the European Central Bank interest rate outlook is much more favorable than other major countries given the steady economic growth in the euro zone. The single currency accelerated its rally after it broke a major resistance at 1.34 versus the dollar. The euro climbed to a two year high at 1.3440 against the dollar, and approached an all time high versus the yen.

German industrial production unexpectedly rose for a fourth straight month in February, reinforcing the expectations for a faster economic growth in the nation. In contrast, the market predicts a slow down in the US economy and the overall sentiment of the dollar is pretty bearish. US interest rate futures shows traders priced in a 60% chance that the Fed will cut its benchmark rate from 5.25% to 5% in August, up from 55% odds yesterday.

Since the trading volume before the US job report and long holiday weekend is lower than usual, the move may be a little bit exaggerated.

The market will focus on the US nonfarm payroll data due 08:30 EST tomorrow.

EURUSD will face interim resistance at 1.3450, followed by 1.3480 and 1.35. Additional ceilings will emerge at 1.3520, backed by 1.3550. Support starts at 1.34, backed by 1.3380, 1.3350 and 1.3320. Subsequent floors are eyed at 1.33.

USDJPY encounters interim resistance at 119, backed by 119.30 and 119.50. Subsequent ceilings will emerge at 119.80, followed by 120 and 120.50. On the downside, support begins at 118.50 and 118.30, followed by 118. Additional floors are eyed at 117.80, backed by 117.50 and 117.30.

GBP Fell after Rate Announcement

The sterling dipped 50 pips to 1.9670 versus the dollar after the Bank of England announced this morning to keep interest rates unchanged at 5.25%, disappointing some who had speculated a surprise rate hike.

GBPUSD encounters interim resistance at 1.9730, backed by 1.9750, and 1.9770. Subsequent ceilings will emerge at 1.98, followed by 1.9830 and 1.9850. On the downside, support begins at 1.97, followed by 1.9670 and 1.9650. Additional floors are eyed at 1.9620, backed by 1.96 and 1.9580.