FRS rate hike is in doubt…Rate dynamics and recommendations on EUR-USD and GBP-USD. by OpenForex.com

FRS rate hike is in doubt…Rate dynamics and recommendations on EUR-USD and GBP-USD.

07:43 06/07/2004

FRS rate hike is in doubt…Rate dynamics and recommendations on EUR-USD and GBP-USD. Thursday data on jobless claims in the U.S. showed increase in the number of claims in the week, thus strengthening the opinion that FRS rate would be raised at least 50 basic points higher by the end of the quarter. Nonfarm payrolls also increased. In the U.S. in May, nonfarm payrolls made up +248 000, whereas forecasted +230 000; previous value was revised from +288 000 to +346 000. The indicator came out higher than forecasted and its previous value was revised aside increase. That means that FRS might think rate hike to be premature, as inflationary pressure caused by jobless claims rise might be counter-balanced by payrolls’ increase. Analysts think that rate is likely to be raised not more than 25 base points by the end of the month. Currency market players were unanimous in their reaction – they freed themselves of the dollar in favor of the Euro and pound sterling. The Euro was supported by positive news from Germany, one of the largest European economies. Factory orders showed the highest rise this year and rose 2.5% in April compared to March. Compared to the similar period of the previous year, factory orders rose 7,7%. Oil market news was positive for the dollar and pound sterling. Oil futures fell at London and New-York Exchanges as an answer to OPEC quota hike to 2 million barrels per day. That also helped to ease tensions at energy market and reduced pressure on the EU economy. Recommendations: on EUR – uptrend has entered the last stage of its development – 4th wave of correction – reaction to oil market stabilization and Thursday Labor market data. We also see the development of the 5th trend wave and breaking-out of resistance at 1,23. 5th wave is the most unpredictable part of the trend that is why it is better to stay out of the market today. On GBP – there is no clear picture on pound sterling. Rising higher than the level of resistance at 1,84 provides higher potential for growth. Recommendations: on EUR – uptrend has entered the last stage of its development – 4th wave of correction – reaction to oil market stabilization and Thursday Labor market data. We also see the development of the 5th trend wave and breaking-out of resistance at 1,23. 5th wave is the most unpredictable part of the trend that is why it is better to stay out of the market today. On GBP – there is no clear picture on pound sterling. Rising higher than the level of resistance at 1,84 provides higher potential for growth.

The forecast was created by trans1.