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Noncommittal ECB Hits Euro Bulls

The Euro stabilized in the overnight, only to fall victim to a string of events that led the currency pair to top our market movers on the session.  Declining by 1.3 percent, the major currency pair fell from a 1.2808 session high as the greenback benefited from the reported death of the commander of <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Iraq insurgency, Abu Musab al-Zarqawi.  Responsible for the recent string of terrorist attacks in the country, Zarqawis death quells some concern over the geopolitical risks in the Middle East.  Coupled with the recent calming of tensions with Iran, the news thins out some unwanted weight on recent dollar negativity continuing the seemingly temporary reprieve.  Subsequently, the better than expected initial jobless claims report exacerbated Euro weakness with the rather noncommittal tone from Trichets subsequent statements on the central bank decision sparking the morning decline.  Notably, with significant downside still possible in the price action, a quasi central bank entity was seen taking bids on the 1.2630 level propping up the near figure.  Looking ahead, tomorrows trade balance figures is expected to add to some profit taking as the US based figure is expected to widen in the month.

Rumormill

Bids are residing the 1.2625 and 1.2630 figures with a quasi central bank entity providing for the bid.  With stops just below at 1.2620, further buying interest looks to enter on a break below the figure.  Comparative selling interests surround the figure just above current consolidation at 1.2670 and 1.2695.  Offers continue to remain heavy above the figure.

GBPUSD

UK Data Disappoints, Lends To

Sterling offers entered heavy in the London session following news of Zarqawis death and lackluster economic data on the British side.  UK industrial production declined in the month against expectations that the sector improved in the black for the past 30 days.  The figure played into the fact that the Bank of England remained on their hands, keeping the rate at the current 4.5 percent in their monthly decision.  Although the decision was widely anticipated by the market, sentiment is likely to shift from expecting two rate hikes by the end of the year to no rate hikes in the near future, reflective of still tepid consumer figures.  Contributing to the overall bearish bias, housing prices rose less than expected on the monthly gauge while manufacturing production dipped in line with industrial figures.  Seller still reside at the current consolidation, however, should remain light heading into the Asian session and tomorrows US trade balance figure.  The report is expected to show another shortfall of $65 billion compared to the narrower $62 billion last month.

Rumormill

Emerging bids look to mounting at the 1.8370 and 1.8390 figures keeping the pair propped in the near term.  However, with selling pressure above at 1.8470 and the 1.8500 figure, gains look to be capped ahead of the US trade balance report tomorrow.  Till then, price action looks to be restrained even in light of the UK visible trade deficit.

AUDCAD

Aussie Major Boosts Cross Bidding

Initially falling through support in the overnight, the Australian dollar minimized downside pressure from the days commodity fallout as employment figures improved.  For the month, the employment survey added 56,000 new positions, almost five times the original consensus figures.  Dropping the overall unemployment rate to a 4.9 percent print, the report released late yesterday further sparked rate hike speculation following the better than expected GDP figures and narrowed deficit earlier in the week.  However, with selling pressure still looming on dollar momentum, long initiatives may be slightly hasty at this juncture.  Notably weighing on the pair was a news release that cited commodity fund Ospraie Management LLCs decision to close one of its commodity funds.  Drawing down 29 percent, the fund held losses in commodities with some seeing one less short covering source to affect the market.  Comparatively, Canadian dollar losses stemmed mainly from US sentiment as crude contracts followed the major trend lower earlier in the day lending to the AUDCAD cross strength.  Looking ahead, traders will be eyeing the merchandise trade balance release for tomorrow.