Heads The Euro Wins, Tails The Dollar Loses…

European Mid Morning Update

Releases from Europe

However, German consumers have shirked the concerns of their European compatriots and have remained steady in their confidence according the GfK market research group. Certainly this reflects the improvement in yesterday's IFO release which saw retail sentiment boost the index.

However, again in line with the IFO the GfK report highlighted a weaker expectation component which dropped by 14.1 points to 14.6. Continuing rising prices are the consumers' main fear.

This fear will not be appeased by January's import prices which rose by an annualized 5.2%, a level that would have Bundesbank officials bouncing from wall to wall in days past.

Indeed, at these levels the ECB will be paralyzed as they assess the need to counter inflation but also the ongoing crisis as European banks announce writedowns from subprime losses while the LBO market quakes from the inability to service their debt.

The following economic releases are due today:

Q4

U.K. GDP (QoQ) +0.6%
U.K. GDP (YoY) +2.9%

January

Euro-zone M3 Money Supply (3MoY) 11.8%
Euro-zone M3 Money Supply (YoY) 11.3%
U.S. Durable Goods Orders - 4.0%
U.S. Durable Goods Orders ex transp - 1.3%
U.S. New Home Sales (MoM) - 0.7%
U.S. New Home Sales 600K

February

Italian Retailers' Confidence General
Italian Services Survey

Bernanke is due to report on the economy and Fed policy

There is little else but pessimism in the market following the Dollar's decline to new lows against the Euro and Swissie triggered by a series of negative economic releases yesterday. There seems to be nothing in the near term that looks remotely like providing any relief.

Quite the contrary in fact with even the Fed's Kohn adding a bleak outlook by confirming that following months of denying that the housing woes had over-spilled into the rest of the economy he now saw evidence of both housing and credit crisis now impacting on other sectors.

Tonight the Fed Chairman Bernanke is due to address the U.S. Congress and is expected to confirm that the Fed will cut interest rates further. The FOMC meets next on the 18th March but there may be speculation that they could act earlier in a second emergency cut.

Expectations are for a minimum of 25bp and probably 50bp in spite of the fact inflation continues to worsen with oil prices above $100pb.

It is not as if Europe doesn't have its own problems. While most point to yesterday's German IFO results as positive the outlook component was below forecasts and other confidence numbers from France and Italy were decidedly on the soft side.

European consumers appear to be becoming more pessimistic abut their lot as well and we may see further evidence today from Italy and Germany. From the States are the durable goods orders and new home sales. The latter is almost certainly going to be soft. Durable goods are another risk to the Dollar's downside.

So unless Bernanke can generate any more positive input the Dollar still looks set to make new lows. 1.5210-20 Euro and 1.0520-30 Swissie along with 1.9957-70 provide barriers.

Today we should watch the levels already reached at 1.5050-60 Euro, 1.0676 Swissie and 1.9957-68 Pound - only breach would extend Dollar losses today.

Note important support and resistance areas:

Ian Copsey
Global Forex Trading
http://www.gftforex.com

DISCLAIMER: This forum and the information provided here should not be relied on as a substitute for extensive independent research before making your investment decisions. Global Forex Trading is merely providing this column for your general information. The views of the author are not necessarily those of Global Forex Trading, its owners, officers, agents or employees. In addition, any projections or views of the market provided by the author may not prove to be accurate. Global Forex Trading and Cornelius Luca will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained in this column. Global Forex Trading and Cornelius Luca do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.