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News that the European Central Bank will keep interest rates at 4% helped the Euro make a short-term bottom this week.

Despite a couple of economic reports indicating weakness in the Euro Zone, ECB President Jean-Claude Trichet remains firm on his mandate to knock inflation down to an acceptable 2% level.

Earlier in the week, Trichet stated that he expects inflation in Europe to stay high. Before Trichet spoke, however, a non-voting Fed governor warned that the Fed would not be averse to raising rates if inflation begins to get out of control.

With both the ECB and Fed recognizing inflation as a threat to their economies, the EURUSD may stay locked in a range between 1.60 and 1.52 until either one of the central banks makes the next move regarding interest rates.

With this in mind, look for the next selling opportunity in the EURUSD after a retracement back to 1.5620.

Please do not hesitate to contact us at 800-971-2440, with any questions.

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