Wednesday, August 02, 2006

Daily Thought on the EUR/USD

Pause in EUR/USD- Fundamental outlook

Not only were there no major economic reports to drive the market today, but the lack of volume can be compared to as the "calm before the storm". By storm, I am referring to tomorrow's ECB rate announcement. The ECB is expected to raise rates but before you go buying your Euro's you should keep in mind that the rate hike is already priced into the market. What you want to look out for tomorrow are the signals of whether or not the ECB plans to continue raising rates in the future. Seeing as how last month, Trichet testified that they would take strong action against inflation might be a sign that the ECB will continue raising rates throughout the year.

Technical Outlook in the EUR/USD

The Euro once again found resistance at 2800. This level will be a good one to watch especially with the rate announcement coming out tomorrow. If price makes a good break of this level I could see it going as high as 2940 (the next resistance point on the chart). If you're looking for a more conservative target, 2860 would be another good level to take profit. That is a shorter term resistance level.

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