The euro recovered in the US session to trade higher following a late day rally as the currency looks to close up on the day. However, today’s move in the US trading session may be a “Dead Cat Bounce” as the EUR/USD remained inside a defined range and event risk remains following the European finance minister’s meeting.
A mid-US session rally helped the EUR/USD trade as high as 1.4235 before falling back to 1.4220. Weaker than expected US housing data and industrial production numbers originally fed into USD buying but as the trading wore on the euro began to draw bids. The euro rally is surprising given the European finance minister’s meeting did approve an aid package for Portugal but the jury is still out on Ireland and Greece. This subsequent event risk hangs over the head of the euro.
Today’s price action shows this may be a short rally before further potential declines. The daily high coincides with yesterday’s high as well as a downward sloping channel line off of the May 11th peak. The lower channel line falls off of the May 9th low.
Cable went on a rollercoaster ride after the release of higher than expected UK inflation numbers. The GBP/USD rose to as high as 1.6302 before falling back to 1.6185 and looks to close near 1.6250.
Tomorrow UK unemployment data will be released along with the BOE MPC Meeting Minutes. No change is expected in the voting as the meeting took place prior to the upcoming departure of known hawk Andrew Sentance. His replacement is former Goldman Sachs economist Ben Broadbent who maintains the view of holding UK interest rates at ultra-low levels until the economy gains traction. Q1 UK GDP expanded by only 0.5% following a Q4 contraction of -0.5%. GBP/USD support comes in a 1.6140 with resistance at 1.6515.
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