Euro Holds Steady to Better after Trichet’s Positive Spin

The U.S. Dollar istrading mostly lower versus the major currencies today in light trading astraders curtail activity ahead of Friday’s U.S. Non-Farm Payrolls Report. Theemployment report is expected to show a decline of 65,000 to 90,000 jobs,pushing up the unemployment rate to 9.6%.

The U.S. Dollar is trading mostly lowerversus the major currencies today in light trading as traders curtail activityahead of Friday’s U.S. Non-Farm Payrolls Report. The employment report is expectedto show a decline of 65,000 to 90,000 jobs, pushing up the unemployment rate to9.6%. The public-sector part of the report is expected to show a loss of atleast 165,000 jobs due to government firings of census workers. Theprivate-sector is forecast to have added at least 100,000 jobs.

The focus will most likely be on theprivate-sector number. It this number comes out better-than-expected, look forthe Dollar to rise.

The Dollar has been under pressure most ofthe trading day due to a surprise drop in weekly initial claims. Unemploymentbenefits rose by 19,000 to 479,000 in the latest week. Pre-report estimatescalled for a drop to 453,000.

The European Central Bank and Bank ofEngland monetary policy committees voted to leave there respective benchmarkinterest rates unchanged at historically low levels. The ECB left its keyborrowing rate at 1%. The BoE agreed to maintain its 0.50% level. Both moves bythe central banks were expected.

Following the release of the interest ratedecision, ECB President Trichet noted that the European bank stress testscompleted since the last meeting have helped increase transparency and fueled amove toward restoring market confidence in the banking sector.

In the wake of recent strong Euro Zoneeconomic data, analysts had expected Trichet to outline an exit strategy ordiscuss the ECB’s plan for its special liquidity provisions. In other words, isthe ECB going to continue to provide free-flowing liquidity to the market orbegin to withdraw it. Trichet indicated the ECB would consider this action onthat next month.

Trichet failed to say anything reallybullish about the Euro, but actually may have helped limit gains by statingthat the second half of 2010 was likely to be “much less buoyant” than thesecond quarter because of the implementation of new financial austeritymeasures. He also added that it was too early to “declare victory” in theeconomic crisis.

Based on today’s comments, the Euro is mostlikely to continue to be driven by economic news regarding the U.S. economy.At this time, the ECB seems a little more upbeat about the Euro Zone economywhile the U.S. Fed is being encouraged to consider the renewal of itsquantitative easing program to ward off a potential double-dip recession. Aslong as the U.S.economy remains weak and interest rates low, look for the Euro to remain firm.

The Bank of England as expected leftinterest rates unchanged. Traders will not be watching economic reports to seeif the implementation of new austerity measures and tax hikes has an adverseaffect on the economy after strong second-quarter GDP data was posted. Thecentral bank will also continue to monitor the inflation rate which iscurrently above the target level.

Look for sideways trading the rest of theafternoon and overnight as volume is expected to thin ahead of tomorrow’simportant U.S.jobs report.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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