Forex - Dollar reversed from early week gains against the Euro

Forex News and Events: The Dollar slid on Wednesday, snapping its early week gains against the Euro, as investors debated the outlook for interest rates in the US and Europe given statements from central bank officials in recent days. Investors expect a euro-zone rate rise as soon as July based on comments from ECB President Jean-Claude Trichet last week, although some of the bank's policymakers have whispered expectations of further rate rises. The Euro did touch a session low against the Dollar on Wednesday after ECB board member Juergen Stark was reported saying the central bank is not considering a series of rate rises. The Euro then recovered as buyers debated Stark's comments compared to tough anti-inflation statements made by other ECB officials in recent days. Yesterday, EurUsd rose 0.65% to 1.5455. UsdChf fell 1.22% to 1.0303. UsdJpy fell 0.45% to 106.85 after hitting 107.76 three-month high. GbpUsd rose 0.54% to 1.9637. Investors will look to today’s US retail report for further clues about the state of the US economy. Fed Vice Chairman Donald Kohn said that a steady rise in energy prices has fueled an inflationary psychology in the United States and could be a problem if it does not reverse. In reaction to this, interest rate futures market was yesterday fully pricing a 50bp increase in the fed funds rate by October and a total of 75bp by year-end.

Today's Key Issues (time in GMT): 07:30 SEK May Unemployment 5.7% vs 6% 09:00 EUR April Industrial Production 0.1% vs -0.2% (MoM) 09:00 EUR April Industrial Production 2.8% vs 2% (YoY) 09:45 EUR ECB’s Weber speaks, Munich 12:30 USD May Export prices 0.6% vs 0.3% 12:30 USD May Import prices 2.3% vs 1.8% 12:30 USD weekly Initial Claims 370k vs 357k 12:30 USD May Retail Sales ex-autos 0.7% vs 0.5% 12:30 USD May Retail Sales 0.5% vs -0.2% 14:00 USD April Business Inventories 0.3% vs 0.1% 22:45 NZD April Retail Ex-autos 0.2% vs -0.5% (MoM) 22:45 NZD April Retail Sales 0.6% vs -1.2% (MoM) 22:45 NZD April Retail Sales 2.9% vs -1% (YoY)

The Risk Today: EurUsd Market posted 1.5844 high on Monday before turning 3cts lower yesterday at 1.5455. Market shall wait for a return over 1.5800 to confirm Euro is breaking up 1.5400-1.5800 consolidation range. This would reopen the way up to 1.6000 Pivot point resistance ahead of key resistance 1.6200 market target. On downside, current level below 1.5800 is slowing down the uptrend but do not open the way down to 1.5000 psychological key level. Support holds 1.5441 Tuesday low. Initial resistance holds 1.5819 May 27th high. GbpUsd Cable holds just over the upper Trendline resistance of two-month downtrend 2.0398 – 1.9364 late May. But it failed to show strong direction. Trading range is set 1.9460 – 1.9850. Psychological 2.0000 level stays into focus. On the downside, a reversal below 1.9600 might bring again focus on 1.9337 January low and 1.9105 (50% retracement of 1.7049 – 2.1162 advance). Strong support holds 1.9363 20th February and 14th May low. UsdJpy Current trend started early this week hit 107.76 yesterday high and 3-month high. This would put 110.10 strong resistance (Trendline) into focus and mid January double top ahead of 111.92 early January high. Any profit taking to and lower than 105 level might send the market back down to 100 – 104 consolidation trading range. Minor support holds 102.58 May 9th low. Initial support holds 104.87 Friday low. UsdChf Market is back again in 1.0400-1.0600 trading range. Early January double top 1.1191 marks strong resistance. Initial support holds 1.0148 Monday low. Further weakness may open the way toward 0.9639 17th March low.

Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.6200 T 2.0447 S 111.92 K 1.1191 1.6000 K 2.0100 P 110.10 T 1.0625 T 1.5819 M 1.9800 S 107.76 M 1.0385 S 1.5570 1.9600 106.60 1.0325 1.5435 T 1.9363 S 104.87 M 1.0148 M 1.5366 S 1.9337 T 102.60 M 1.0000 P 1.5000 K 1.9105 K 100.00 P 0.9637 K S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot