[IMAGE] Forums Discuss these points in the Forums:  Forexnews Forum       Technicals Live Charts Analysis available from: Cornelius Luca   J.P. Chorek   Technical Research Ltd.   Charts & News featuring Standard & Poor's       Interest Rates   US: Japan: Eurozone: UK: Switzerland:   1.75%  0.15%  3.25%  4.0%  1.25-2.25%       [IMAGE] 	 [IMAGE]  Euro Rally Running Out of Steam Despite Dollar Weakness  February 12, 7:00 AM: EUR/$..0.8750 $/JPY..133.60 GBP/$..1.4263 $/CHF..1.6872  Euro Rally Running Out of Steam Despite Dollar Weakness by Jes Black  At 8:40:00 AM US Redbook (exp n/f, prev 3.9%) At 10:00:00 AM US Jan Rich Fed Survey Shipments (exp n/f, prev -25)  The euro again failed to break the 88-cent mark in European trade today despite again being helped by sterling's gains against the dollar. EUR/USD rose to a day's high of 88.00 but retreated back to a low of 87.41 as offers in the 88.00/10 kept the upside in check. However, GBP/USD continued to forge ahead, breaking key resistance at 1.4235 today, triggering stops on its way to a new two-week high of 1.4285.  Reaction to news that Germany was not formally warned about its budget deficit at today's Ecofin meeting in Brussels was muted, but seen as a positive for the euro. Germany was facing censure for allowing its deficit to come close to the 3% of GDP limit. Nevertheless, underlining today's compromise was the difficulty facing the Eurozone's largest economy caught between the European Central Bank not lowering interest rates and Germany's own brain child -- the Growth and Stability Pact.  Offers at 88.00/10 kept a cap on EUR/USD again today after yesterday's wave of stop-loss buying failed to develop a more sustainable demand for the euro. The single currency still needs to clear 88 cents followed by key resistance at 88.75/80 to remove its bearish outlook. That level marks the 61.8% retracement of this year's high to low of 90.63 to 85.63. Looking forward, unless the single currency can rise above the 88.80-cent level, its momentum should wane and turn back south again. Key support is seen at 87.50 and 87.00.  The euro also reversed course against the pound after a test of 61.95 last Friday was rejected. Today's break below 61.55 support triggered stop loss sales on its way to a low of 61.32. Therefore, renewed pressure on the pair could carry it back towards this month's lows around 60.68 pence. This would cause the euro to give up any further gains on the back of a rise in GBP/USD.  Sterling was little changed by an unexpected jump in UK inflation to a high of 2.6% in January from 1.9% the month before. This was a surprising rise above the Bank of England's target rate of 2.5% so the market will be interested in hearing Wednesday's Bank of England inflation forecast that should provide clues on interest rate hikes later this year. Stronger than expected inflation would lead to further expectations for the UK to be the first major country to raise interest rates this year as the BoE tries to stem debt fueled consumer spending. Markets will also want to know if the bank revises its growth outlook for the UK.  GBP/USD is currently trading above 1.4275, but gains are seen limited to the 1.4335 area, which marks the 61.8% retracement of the move from 1.4515-1.4040 move. Without a break of that level, the pair remains heavy, dealers say. Support seen at previous resistance levels of 1.4235 and 1.4180.  USD/CHF also recovered from an earlier low of 1.6779 reached at the start of European trade, and rebounded to a day's high of 1.6887. The sharp rally ended around resistance at 1.6880. For the near term USD/CHF needs to maintain above 1.6820 to avoid further fall to the 1.6685 area. This level marks the 61.8% retracement of the 1.6350-1.7229 rally, which should hold dealers say. Resistance is seen at 1.6880.  Economic data on Monday showed the Swiss January jobless rate rose to 2.6% from 2.4% in December, as expected. Recent comments from the Swiss National Bank show they are still concerned by the strong Swiss franc against the euro due to the pressure on trade. Blattner also rejected an exchange rate target for Switzerland and stated that the bank should not cut rates to weaken the franc. His comments contrasts with earlier comments from board member Gehrig and SNB president Roth that have singled out the currency as very important to the Swiss economy as well as having expressed concern over the strength of the franc.  There is little in the way of economic data this week until Wednesday. Today's only release is the Richmond Fed survey which is likely to show that manufacturing activity stabilized last month, lending support to recovery being right around the corner.  Despite two consecutive days of gains on Wall Street, the dollar will continue to take its cue from the stock market and today's congressional hearings and the much-anticipated testimony of former Enron CEO Kenneth Lay before the Senate Commerce Committee will take center stage. Lay will take the stand at 9:30 AM EST, but will likely take the fifth to not incriminate himself.  Today's earnings include Applied Materials, BP Amoco, Fox Entertainment and Prudential Financial, Inc.  	[IMAGE] Audio Mkt. Analysis EUR/JPY Sets the Pace       Articles & Ideas  The Swiss National Bank and the franc   A Weak Yen Bites       Articles & Ideas Forex Glossary   Economic Indicators   Forex Guides   Link Library      [IMAGE] 	
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