Will releases support rate hike expectations?

Last week we had rollercoaster movements for EUR/USD due to Central Bankers talking about rate hikes in the near future. First we had Bernanke talking about growing concerns on inflation and the intention of the FED of hiking interest rates on the near future... as well as his remarkable comments on behalf of a weak Dollar. He will speak again today, so lets watch for some fireworks at night. This release took the pair below 1.5400, for a while at least but it was erased by Trichet’s aggressive insight that the ECB is planning to hike interest rate as soon as July. This week we need to focus on releases that will either support or take away the idea of a rate hike on either side of the pond.  If Trichet and the ECB do nothing on July’s meeting, that might be the end of them and their credibility, so expect the Euro to go below 1.5000 if that happens in July!
 
We begin on Monday with EZ Trade Balance followed by an appearance by Bernanke. This appearance grows in importance as it is the first one since his statement of the possibility of a rate hike in upcoming FOMC meetings. Tuesday brings US trade balance which we believe will continue to read stronger as a weak USD continues to boost exports. Wednesday will show us the Beige Book. Thursday will release numbers for Retail Sales, this release is important because the FED is concerned with inflation but they wont hike rates until recession pressure eases. Finally on Friday we get US CPI, GER CPI and US Consumer Confidence; all of these releases are very important because they will show us what inflation really looks like on each side of the pond as well as what are US consumers thinking about the possible recession.  Speaking about Recession… Fitch announced that they believe US is already coming out of it!!! And that it was a mild and soft one indeed.

After two weeks of the EUR/USD remaining in our daily channel we finally see a candle stick its head out of it. Today we finally saw the pair break the roof of the channel and we expect it to get back in as soon as possible. The pair is testing the resistance as it tries to get back into the channel. Let’s wait and see how things turn out later on the day as Bernanke takes the stage.

EUR/USD

The EUR/USD moved widely last week as central bankers on both sides of the pond began to talk about rate hikes. On the following weeks it will be key to focus on releases that are related to growth on the US and to inflation on both sides of the pond. This week it will be important to keep an eye on Retail Sales, Trade Balance and CPI. Remember to be patient and remain focused as profits come our way.

DAILY GRAPH

EUR/USD has been moving within the channel. It seems to be waiting for a stronger release to show the market where it should move next.

Our analysis indicates Short EUR/USD every time it reaches 1.5770
• Take Profit 1:1.5700
• Take Profit 2: 1.5600