Forex - Forex market await ECB and BoE rate decision and comments

Forex News and Events: The Euro drifted lower on Wednesday, with investors expecting the European Central Bank's vigilant stance on inflation to give way to concerns about economic growth following a decision on interest rates on Thursday. The ECB is expected to keep the benchmark euro zone interest rate at 4% (1% above the US rate), leaving the focus on whether the central bank's president, Jean-Claude Trichet, will stick to his hawkish stance amid signs of slowing growth in Europe. Yesterday, EurUsd was trading down 0.15% at 1.4613, near the middle of a 1.4967-1.4311 range since mid-November. EurJpy was down 0.28% at 155.47 and EurChf slipped 0.32% to 1.6038. UsdJpy was down 0.13% at 106.39, weighed by a late-session decline in US stock indexes. GbpUsd was down 0.15% at 1.9616 after having drop down to 1.9554 low. Futures markets already reflect expectations that the ECB will cut rates by a 50bp by the 3Q, but are split on chances of a further 25bp easing by year end. The Bank of England will also be meeting on Thursday as well. Investors are expecting UK interest rates to be cut to 5.25% from 5.5%. Investors had earlier bought the Yen as Asian stocks posted their biggest loss in two weeks on worries about the health of the global economy, dampening investors' appetite for riskier assets. Worries about the global economic outlook were stoked on Tuesday by a sharp fall in the ISM's non-manufacturing Index, a gauge of the vast US service sector, which posted its biggest monthly decline on record. There were also signs that the slowdown will not be limited to the United States. Euro zone retail sales fell in December despite Christmas shopping, while growth in the bloc's service sector slowed almost to a standstill in January. Reports such as these have fed speculation that the Euro has yet to weaken the way that the Dollar did last year when the credit crisis began to imperil the US economy.

Today's Key Issues (time in GMT): 06:45 CHF January Unemployment Rate 2.6% vs 2.6% 09:00 NOK December Manufacturing output -1.2% 09:30 GBP December Industrial Production 0.2% vs -0.1% (MoM) 09:30 GBP December Industrial Production 1% vs 0.4% (YoY) 09:30 GBP December Manufacturing Production 0.1% vs -0.1% (MoM) 09:30 GBP December Manufacturing Production 0.3% vs 0.1% (YoY) 12:00 GBP BoE Rate decision 5.25% vs 5.5% 12:45 EUR ECB Rate decision 4% vs 4% 13:30 USD Initial Jobless Claims 340k vs 375k 15:00 USD December Pending Home Sales -1% vs -2.6% 20:00 USD December Consumer Credit $7.3B vs $15.5B 23:50 JPY December Machine Orders -0.9% vs -2.8% 23:50 JPY December Bank Lending 0.1% 23:50 JPY December Money Supply (M2+CD) 2.1% vs 2.1%

The Risk Today: EurUsd Rebounded from January 22nd 1.4366 low for a clear run through 1.4500 pivot point. Current trading range is set 1.4366 – 1.4952. Market traded as high as 1.4952 last Friday, in sight of 1.4967 resistance November high. Further strength might open the door up to 1.5000 key level. Initial support holds 1.4500 pivot level, where below it, market might look down for 1.4280 next support after trendline support holding 1.4311 December low. GbpUsd It is holding on former Trendline resistance as end January positive trend didn’t last. Strength has been reversed Friday and Cable found support on the former Trendline resistance at 1.9590 (38.2% retracement of 1.7049 – 2.1161 advance). Uptrend confirmation will only lock within a return 2.0000 key level before 2.0100 resistance. Meanwhile, pressure below 1.9800 might open the door toward 1.9337 January low and 1.9105 (50% retracement of 1.7049 – 2.1162 advance). UsdJpy It remains weak below 108, having tested 104.97 low 23rd January. In recent downtrend, pressure opened the way to 106 support. Further support holds 104.97 ahead of 104.20 trendline support. Initial resistance holds 107.89 Friday high. Strong resistance holds 110.10 previous week double top ahead of 111.92 early January high. UsdChf It dropped Friday down to 1.0732 new low but rebounded up to 1.0901 the same day. It extend up to 1.1057 high on Tuesday. Initial resistance holds 1.1123 late January 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 1.4907 M 1.9959 M 107.89 M 1.1123 M 1.4615 1.9590 106.45 1.0980 1.4500 P 1.9483 M 106.00 S 1.0846 M 1.4366 T 1.9337 S 104.97 M 1.0812 K 1.4280 S 1.9105 S 104.20 T 1.0759 T S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot