Forex - Euro rise as shadow of an ECB interest rate cut fade with stock support

Forex News and Events: The Dollar slid against the Euro on Thursday as tough inflation comments by a European Central Bank official and strong German business confidence data dashed hopes for a near-term interest rate cut in the euro zone. An improvement in investors' appetite for risk, following a sharp rebound in European stocks and gains in US equities, pushed down the Dollar versus high-yielding currencies such as the British pound and the Australian and Canadian dollars. ECB governing council member Axel Weber said the Federal Reserve's surprise decision to cut its key overnight lending rate by 75bp to 3.50% on Tuesday had not shifted the ECB focus on euro zone inflation, dampening rising expectations that it too will have to cut rates soon. On Thursday, EurUsd rose 0.98% at 1.4772. EurJpy rose 1.36% to 158.25. UsdJpy was up 0.41% at 107.19, after earlier slipping to 105.94 intraday low. UsdChf fell 0.32% to 1.0884. GbpUsd rose 1.08% at 1.9779, after hitting an intraday 1.9500 low. GbpJpy was up 1.47% to 211.97. The euro was under selling pressure in recent weeks as signs emerged that weakness in the US economy was having a knock-on effect on the euro zone, fueling the argument for a rate cut by the ECB. Some of those concerns eased slightly on Thursday after the Ifo economic research institute reported that German corporate sentiment unexpectedly rose in January, bolstering policy-makers' assertion that the euro zone economy can withstand turmoil in financial markets. Euro zone rate futures, which were pricing in 75bp earlier this week, now price in about 40bp of easing this year. The ECB's benchmark rate is currently 4%. The Australian dollar benefited from the improvement in risk appetite and a surge in the price of Gold by 2.33% at 913.65 an ounce. AudUsd rose 1.18% to 0.8829, while NzdUsd went up 0.48% to 0.7671. There was little reaction to a report showing that the pace of existing-home sales in the United States fell 2.2% in December to a slower-than-expected 4.89 Mio-unit annual rate.

Today's Key Issues (time in GMT): 07:10 EUR February Germany Consumer Confidence Survey 4.4 vs 4.5 07:45 EUR January France Business Confidence Indicator 109 vs 110 07:45 EUR January France Own-Company Production Outlook 15 vs 15 09:00 EUR 4Q Spain Unemployment survey 8.2% vs 8.03% 12:00 CAD December Consumer Price Index 0.1% vs 0.3% (MoM) 12:00 CAD December Consumer Price Index 2.4% vs 2.5% (YoY) 12:00 CAD December Bank of Canada CPI Core -0.1% vs 0.0% (MoM) 12:00 CAD December Bank of Canada CPI Core 1.7% vs 1.6% (YoY) 16:00 CAD November Budget Balance CAD -2.72B 16:00 CAD November Budget Balance year-to-date CAD 6.62B

The Risk Today: EurUsd Rebounded on Tuesday 1.4366 low for a clear return over 1.4500 pivot point. Current trading range is set 1.4366 – 1.4922. Market traded as high as 1.4922 last week, in sight of 1.4967 resistance November high. Further strength might open the door up to 1.5000 key level. Tuesday 1.4366 low marks support. Lower than 1.4500 pivot level, market might look down for 1.4280 next support after trendline support holding 1.4311 December low. GbpUsd remains in the downtrend started mid-November. It dropped down to 1.9337 on Tuesday before recovering up to 1.9604 the same day and higher in the following days. Renewed downtrend pressure might open the door toward 1.9105 (50% retracement of 1.7049 – 2.1162 advance). Longs will only lock within a return over 1.9800 short term Trendline and 2.0000 key level ahead 2.0100 resistance. Initial supports hold 1.9483 11th January low and 1.9337 yesterday low. UsdJpy remains weak having tested 104.97 Wednesday low. In recent downtrend, pressure opened the way toward 106 support. Initial support holds 104.97 ahead of 104.20 trendline support. Strong resistance holds 110.10 last week double top ahead of 111.92 early January high. UsdChf Last three days sharp drop bring us back close to 1.0838 last week low. Yesterday low hit 1.0846. Further weakness will reopen the way down to 1.0759 trendline low. Initial resistance holds 1.1123 Tuesday high. Market might look for 1.1130 (38.2% of 1.1603 – 1.0838 decline). Early January double top 1.1191 marks strong resistance.

Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.5000 K 2.0245 S 114.00 P 1.1500 P 1.4967 S 2.0100 S 110.10 S 1.1191 S 1.4779 M 1.9985 M 107.38 M 1.1123 M 1.4755 1.9760 107.30 1.0885 1.4500 P 1.9483 M 106.00 S 1.0846 M 1.4311 T 1.9337 M 105.63 M 1.0838 K 1.4280 S 1.9105 S 104.20 T 1.0759 T S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot