Dollar bulls were on the rampage in the overnight session, breaking through the pivotal 1.4000 support figure in the EURUSD currency pair.  Greenback strength was also visible against the pound sterling following a surprisingly worse than expected US jobless claims report.  Not to be confused with Friday’s US nonfarm payroll report, the jobless claims announcement showed a higher than expected level of first time unemployment claims for the week, rising to the highest level in almost 7 years.  Increasing 1,000 to 497,000 in the week ending September 27^th, the Labor Department report almost ensures the market of a near six figure deduction in payrolls at week’s end with a potential uptick in the unemployment rate.

Nonetheless, let’s not forget the continued reconversion of US dollar based assets and inflows into the world’s largest economy that are helping to support dollar strength at the moment.  Worsening the situation, for non dollar currencies, is the potential for rate cuts in European economies.  Although the ECB decided to keep rates steady at the current 4.25 percent this morning, continued speculation hovers over a late January 2009 rate reduction, as inflationary pressures continue to weigh heavily on the minds of Trichet and Company.  In the same manner, British citizens may be receiving their rate cut soon enough as probabilities rise of a 25 basis point cut sometime at year’s end.  Both ideas will likely continue to weigh on both the Euro and British Pound until further indications present themselves in Friday’s pivotal report.

Technically, although we have seen a near term break of the 1.4000 figure, bids are likely at this level in the Euro (currently trading at 1.3799).  Lower channel support enforces the idea, sparking short term targets at the 1.3900 round number, where participants are likely to “sell on bounces”. 

Tags: Euro, US Dollar, US Unemployment

This entry was posted on Thursday, October 2nd, 2008 at 9:06 am and is filed under British Pound, Currency Trading, Euro, US Dollar. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.