Euro Traders Expecting Hawkish Commentary

The Euro is trading in a tight range as tradersawait the comments of European Central Bank President Jean-Claude Trichetfollowing this morning’s central bank policy statement. Investors will belooking for signs that the ECB is moving closer to hiking interest rates.

The Euro istrading in a tight range as traders await the comments of European Central BankPresident Jean-Claude Trichet following this morning’s central bank policystatement. Investors will be looking for signs that the ECB is moving closer tohiking interest rates. Trichet may mention that data supports a hike ininflation, but that the ECB may not be as aggressive as the market has pricedin. This may mean the Euro will feel pressure as investors lighten up longpositions. Talk of hiking rates at a steady pace throughout the year may bewhat the market is looking for.

Technically,the Euro is in a strong position, having taken out a major Fibonacciretracement level at 1.3744 and a former main top at 1.3861. A failure toextend the rally at current levels may mean a retracement into 1.3659 to1.3604. An uptrending Gann angle is also providing support at 1.3688. On the upside, 1.40 seems to be a reasonableobjective today and could become intraday psychological resistance.

Hawkishcomments have dominated the trading sessions leading up to today’s ECB policymeeting and Trichet’s monthly news conference. This implies that the market isexpecting to hear bullish news. Should Trichet not live up to market expectations,then look for the Euro to retreat.

Trichet isexpected to confirm that there is underlying momentum in the Euro Zone economy.This is expected to be supportive to the Euro. He is also expected toacknowledge inflationary pressures. Whether he announces his belief thatinflation can be contained or that monetary expansion is still moderate islikely to set the tone of the market today.

In summary,look for the Euro to strengthen unless Trichet fails to acknowledge economicgrowth or the presence of inflation.

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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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