The euro fell in early European trading following a Bloomberg report that yesterday's meeting of Europe's finance ministers in Brussels failed to resolve the differences between the ECB and Germany. After two days of euro gains this puts the pressure on the 17-nation currency once again and may be the driving factor in today's trading. Yesterday's high at 1.4500 stands as short term resistance for the EUR/USD while a clear breach below 1.4320 could open the door to test the 1.4000 level for the second time in as many months.
Today's Economic Data Releases:
GBP - Claimant Count Change - 08:30 GMT
Expectations: 7.1K. Previous: 12.4K.
Cable looks weak based on yesterday's doji candlestick and the pair's failure to rise above the recent falling resistance line from the May 31st high. Resistance is located at 1.6425 while the trend line off of the May 2010 low comes in today at 1.6200. A break here and the pair could test the neckline of a potential head and shoulders pattern at 1.6110.
USD - Core CPI m/m - 12:30 GMT
Expectations: 0.2%. Previous: 0.2%.
There are those calling for QE3 to support the tepid economic recovery and struggling US equities, many market pundits and those in the blogosphere forget that QE I and II were implemented to drive down interest rates and avoid a potentially damaging deflationary environment. Yesterday's PPI reading showed an increase of 0.2% on consensus expectations for only 0.1%. With rising inflation data the Fed would be hesitant to further loosen US monetary policy, a potential dollar catalyst in the medium term.
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