Thursday, 14 Jan 2010

Market Awaits European Interest Rate Announcement

The major pairs have been range trading throughout the morning hours of the European session as the market anticipates the release of the European Central Bank's (ECB) decision on interest rates and key economic data from the U.S.

The EUR/USD touched a high today at 1.4554 but was unable to hold the gains and the pair is currently trading just below the 1.4500 level. Most other majors are also trading in a tight range before the announcement.

Despite positive employment numbers from Australia earlier in the day, traders appear to be cautious prior to the release of the European Minimum Bid Rate and the accompanying statement. We expect the ECB to hold rates steady at 1.00% and affirm the possibility of a loose monetary policy in the near term. This could provide some bullishness to the EUR/USD, perhaps sending the pair higher to the 1.4625 resistance line.

Further economic releases are on the calendar today. From the U.S., retail sales and unemployment numbers will be released at 1:30pm GMT. The numbers are expected to show improvement and could overshadow the ECB announcement. Positive U.S. data could send the EUR/USD lower to the 1.4270 support level.