Finotec News Archive - August 06 2008

Euro rises slightly as ECB warns of inflation

European Central Bank President Jean-Claude Trichet will signal higher interest rates may be needed to combat inflation

Tammy Wall
06 August 2008

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EUR/USDUSD/JPYGBP/USDUSD/CHF

Resistance
1.5660
1.5595
1.5525
109.95
108.60
108.50
1.9760
1.9630
1.9600
1.0650
1.0620
1.0600

Support
1.5450
1.5420
1.5305
107.65
107.30
107.10
1.9521
1.9470
1.9457
1.0480
1.0455
1.0435

The euro rose, rebounding from a seven-week low against the dollar, on speculation European Central Bank President Jean-Claude Trichet will signal higher interest rates may be needed to combat inflation. The 15-nation currency also advanced against the yen before the ECB's meeting tomorrow, at which it will keep its key interest rate at 4.25 percent say economists. ``With the ECB being a strong inflation fighter, Trichet may want to leave some room for further rate increases this year,'' said Masaki Fukui, a senior economist and currency analyst in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan's second-largest publicly traded lender by assets. ``The euro may be supported as long as there remains speculation over higher rates.'' The EUR/USD is currently trading at $1.5494 as of 7:48 am, GMT.


The dollar's advance against Japan's currency may stall at 108.76 yen, said Eiji Kinouchi, chief technical analyst at Daiwa Institute of Research, citing charts traders use to predict price movements. The U.S. currency's 25-day moving average versus the yen has risen since late last month, a bullish signal for the next few weeks, Tokyo-based Kinouchi said. The dollar may keep climbing until it reaches 108.76, its 260-day moving average and a level where sell orders are likely to be placed, he said. ``Technically, there is a sign of dollar buying,'' said Kinouchi at the unit of Japan's second-largest brokerage. ``The dollar may be well supported for the next half a month, but the currency's advance should be limited.'' The USD/JPY is currently trading at 108.35 as of 7:58 am, GMT.


The pound fell against the euro after an industry survey showed U.K. consumer confidence dropped in July by the most in at least four years as house prices slumped. Signs that Europe's second-largest economy is headed toward a recession will force the Bank of England to keep its key interest rate at 5 percent tomorrow even as inflation picks up, all 60 economists surveyed by Bloomberg News say. Policy makers cut the rate three times since November as growth sputtered. Britain's faltering economy will weaken the currency to $1.90 and to 80 pence per euro by year-end, according to the median forecast of analysts and strategists. The GBP/USD is currently trading at $1.9564 as of 8:14 am, GMT.

Finotec Analysis Team
06 August 2008

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