ECB Leaves Rates Untouched; Focus on Solving Debt Crisis

The European Central Bank voted to leave interest ratesunchanged this morning as expected. Traders are now looking for ECB PresidentTrichet to at least announce the central bank will extend special liquidity….

The European Central Bank voted to leave interest ratesunchanged this morning as expected. Traders are now looking for ECB PresidentTrichet to at least announce the central bank will extend special liquiditymeasures put in place at the height of the financial crisis. In addition,Trichet is expected to signal that the central bank will boost its purchase oftroubled Euro-Zone sovereign bonds in an attempt to give the market a vote ofconfidence.

The Euro is getting a boost overnight. The follow-throughrally has produced a new swing bottom at 1.2968. Conditions have abated enoughin the Euro Zone to warrant some position paring and short-covering, but notenough to change the trend to up. Look for a minimum 50% retracement to 1.3377.Downtrending Gann angle resistance is at 1.3482.

The GBP USD remains under pressure. The short-term two-dayrally helped form a new main bottom at 1.5484. This did not change the trend to up, but instead served to temporarilyrelieve some of the short-term pressure.

The USD JPY remains is a strong uptrend. Following a two-daysetback, this market has rebounded and is now poised to breakout over the lastswing top at 84.40. Based on the current short-term set-up, 85.93 remains aviable upside target.

Volatility is expected to remain high this week in the Forexmarkets because of the fear of the unknown. To start the week, the market wasconcerned about European debt contagion. By Wednesday, we were talking aboutthe U.S.providing addition aid to the International Monetary Fund.

A two-day rally is not enough evidence to say that the trendis getting ready to turn higher. The best rallies seem to come following theformation of a solid support base. At this time the shorts continue to dominateespecially the risk-linked currency markets.

I don’t believe that Trichet will say anything in his pressconference to hurt the Euro, but I also believe he will not be able to sayenough to put in the bottom and reverse the trend.

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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