EUR/USD Daily Trend Analysis

The Euro was unable to push back above the 1.4150 level against the dollar on Thursday and was generally weaker over the day. Euro-zone unemployment hit a 10-year high of 9.5% according to the latest data which was a slight negative factor for the Euro. The currency was also unsettled by a further Irish credit-rating downgrade by Moody’s. The dollar secured some relief from a round of more supportive comments from Chinese officials as the debate surrounding reserve currencies continues.

As expected, the ECB left interest rates on hold at 1.0% following the latest council meeting. Despite voicing concerns over the 2009 outlook, bank President Trichet was generally neutral in his comments over the economy and interest rates and his comments overall suggested that the bank is in a holding pattern to await further developments in the real economy. Trichet was keen to emphasise that the bank had prepared an exit strategy if there was any evidence of inflation risks.

The headline US employment data was weaker than expected with a payroll decline of 467,000 for June following a revised 322,000 the previous month. The unemployment rate increase was slightly lower than expected with an increase to a 26-year high of 9.5% from 9.4%.

The secondary elements in the data continued to give significant cause for concern with a decline in weekly hours while the unemployment increase was held back by a decline in the workforce which will maintain fears over the consumer spending outlook. Jobless claims also remained above the 600,000 level in the latest week at 614,000.

Risk appetite was generally weaker following the US employment report and this helped push the Euro weaker against the US currency, although there was support just below the 1.40 level. Choppy trading may be a risk on Friday with the US markets closed.

By: Darrell Jobman