Forex - Dollar fell against Euro after ECB rate cut

ex News and Events: The Dollar fell against the Euro on Thursday as some investors lauded the European Central Bank's bolder-than-expected interest rate cut as a proactive step to stave off a deep recession in the 15-nation region. The ECB, seen by market participants as being behind the curve in lowering borrowing costs to boost growth, made its biggest ever cut, lowering benchmark interest rate by 75bp to 2.5%. Most economists had expected a smaller, 50bp cut this month. The Sterling also bounced off session lows against the Dollar. The Bank of England cut its key rate by 100bp to 2%, the lowest level since 1951, and said further steps would be required to prevent a credit squeeze tipping the economy into deep recession. The Yen rose sharply, as falling stock prices and persistent worries about a deepening global economic downturn prompted investors to keep unwinding riskier positions. Yesterday, EurUsd was up 0.54% at 1.2774, rebounding from the session low of 1.2551. GbpUsd was down 0.66% at 1.4681, having touched a more than 6 year low of 1.4470. EurGbp hit a record high at 0.8726 before closing 1.22% up at 0.8702. UsdJpy was down 0.74% at 92.47. EurJpy fell 0.19% to 118.13. Traders were reluctant to take big bets ahead of a key US employment report on Friday. The US economy probably lost 340k jobs in November. US initial claims data released yesterday pointed to further deterioration in the labor market while new orders received by US factories plummeted for a third straight month during October. But analysts said while the deterioration in the labor market is accelerating, many market participants have already priced in an ugly jobs number, and so it may take a larger decline to trigger a major market move. Aggressive central bank rate easing around the world was the main theme in the currency market on Thursday. Sweden chopped rates by surprisingly 175bp, while the Reserve Bank of New Zealand delivered a large 150bp easing. Falling interest rates across the globe take away the yield attraction of currencies whose countries previously had high interest rates, giving further support to the Yen and the Dollar and weighing on higher-yielding units.

Today's Key Issues (time in GMT): 09:00 NOK October Manufacturing output -0.3% vs 0.1% 11:00 EUR October Industrial Orders 0.4% vs -8% (mom) 11:30 EUR US Ambassador to EU speaks on Defense Policy 13:00 CAD November Employment change -25k vs 9.5k 13:00 CAD November Unemployment rate 6.4% vs 6.2% 13:30 USD November Manufacturing Payroll -80k vs -90k 13:30 USD November Non-Farm Payroll -340k vs -240k 13:30 USD November Unemployment 6.8% vs 6.5% 20:00 USD October Consumer credit $2b vs $6.9b

The Risk Today: EurUsd Market is still trading in the last 3-week trading range 1.2330 – 1.3298 but breaking up the triangle consolidation pattern. This may open the way to 1.3500 target equal to 1.3302-1.2334 spread. On the further upside, only a return over 1.4000 (former trendline support) and 1.5000 will release actual pressure and may put key resistance 1.6000 into focus. Resistance holds 1.4002 former trendline support. Initial resistance holds 1.3298 end October high. On the downside, recent weakness below 1.2690 may open the way down to trendline support 1.2208. Next long-term support holds 1.1640 November 2005 low. Further support holds 1.0739 September 2003 low. GbpUsd Market dropped as low as 1.4470 yesterday in current 3-month downtrend dropping from late October 1.6673 high. Strong supports hold 1.3682 March 2001 low. On the upside, strong resistance holds 1.6673 30th October high ahead of 1.7080 (38.2% retracement of 2.1161 – 1.4558). Further resistance holds 1.7860 (50% retracement). Trading range is set between Tuesday 25th 1.5534 high and 1.4470 December low, respectively initial resistance and support. UsdJpy Market confirmed Monday the break down November triangle pattern. Yesterday, pressure did open the way down to 92.88 low. Strong support holds 90.91 24th October low. Further downtrend may open 79.70 April 1995 low. On the upside, strong resistance holds 100 pivot point, but only a recovery over 103 upper trendline and 105 pivot point will put focus again on 108 and 110.67 15th August high. Initial resistance holds 97.43 last week high. UsdChf Market hit 1.2298 high on 21st November. Further strength may look for 1.2463 strong resistance ahead of 1.2506 (61.8% retracement of 1.4278 – 0.9639 decline). On the downside, renewed weakness below 1.1605 initial support and 1.1203 30th October low would undermine the current uptrend and reverse through 1.0692 22nd September low and down to 1.0500 and 1.0375. Such a move may look for 1.0013 15th July low in front of 0.9637 17th March low.