Euro traded low before ECB Policy Meeting
The US dollar rose slightly against the euro on Wednesday on growing expectations the US economy would outperform that of Europe. The dollar initially expanded its gains versus the euro after a government report showed US factory orders rose more than expected in July, adding to signs of resilience in the US economy. In contrast, euro zone data underline a weakening economy in the region. Retail sales in July fell, which confirmed the euro zone economy contract in the second quarter. Retail sales fell to 0.4% in July versus expectations of a 0.1% gain, which was the fifth decline in the last six months. Meanwhile, 2Q GDP for the region contracted 0.2% dragging the year-over-year growth to 1.4%.
The Pound fell below 1.7700 for the first time since April 2006 as speculation increases that the BoE may cut rates. Although the European Central Bank and the Bank of England will issue separate interest-rate decisions on Thursday and both are expected to keep rates on hold. The yen apreciated slightly versus the US dollar on a day of poor of economic data.
All eyes are on the Japanese political vacuum following this week’s surprise resignation of Prime Minister Fukuda.
EUR/USD
The short term picture remains unchanged as the euro continues to lose positions against the dollar as the pair now is targeting the key support level at 1.4320, which is 61.8% retracement of the 1.3262 - 1.6035 rise. A break of that level could open a potential for a new steep decline, and a long lasting positioning below that level could even lead to a trend reversal in the mid term. The Median support at 1.4460 level, which is right on mid term trend line was tested unsuccessfully and still remain the main border before continuing of downward movement. On the upside resistance is seen at 1.4650 and 1.4980, which are 50% and 38.2% Fibo retracement of mentioned movement, followed by the levels around 1.5230, which coincides with the 200- days SMA.
EUR/USD (chart, table)
USD/JPY
The pair traded in narrow range as consolidated around 108.20 levels against the yen, which coincides with the 26-days SMA. Next target by renewing of uptrend will be the resistance at 113.30, which is 61.8% retracement of the 124.12-95.75 drop. There is not rejected the scenario the pair first to test 106.60 level, which is 38.2% Fibo retracement coinciding with 200-days SMA and mid term trend line. A break of that level will consider renewing of down trend and probably sharp drop to levels around 102.45 and lower.
USD/JPY (chart, table)
GBP/USD
The sterling continues to lose positions but this time saw technical support around 1.7670 levels. The short term trend remains extremely negative and the next main goal is the support at 1.7275, multiple bottoms registered July 2005 and February – April 2006. Median support could see at 1.7600. There is not rejected the idea of partly recovering of the pound as sentiment oscillators – stochastic and RSI are both in extremely oversold levels. On the upside, first resistance is seen at the level 1.8080, followed by 1.8485 and 1.8980.
GBP/USD (chart, table)
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04.09.2008 FX daily review.pdf, 613 Kb
