Euro tumbles sharply after ECB Trichet signaled that the bank is in no hurry to raise rates from the current record low level. ECB left the policy rates unchanged at 1.0% today as widely expected and Trichet said that it remains appropriate in spited of recent jump in energy prices. While Trichet pledged to monitor price developments closely, he also emphasized that the developments These developments have not so far affected our assessment that price developments will remain in line with price stability over the policy-relevant horizon. This disappointed euro bulls who expected some thing more hawkish from ECB after CPI stayed above ECB's target of 2% for a second month in January.

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Sterling spiked higher earlier today after PMI services beat expectation and jumped to the highest level in eight months at 54.5 in January. Recent strong economic data continued to support view of sustainable recovery in UK and rate hike from BoE later this year. Nevertheless, sterling was dragged down by Euro after ECB press conference. Meanwhile, dollar manages to rebound with slightly better than expected initial jobless claims number at 415k. Unit labor costs dropped -0.6% in Q4 with non-farm productivity rose 2.6%. Other data released today saw EUrozone retail sales dropped -0.6% mom in December. PMI services was revised mildly up to 55.9 in January. Swiss trade surplus came in narrower than expected at CHF 1.28b in December.

width=272New Zealand dollar is sharply lower after dismal jobs data. The country's unemployment rate jumped sharply in Q4 from 6.4% to 6.8%. The data affirmed markets' view that RBNZ will leave rates unchanged till at least late Q3. Meanwhile New Zealand FInance Minister Bill English said that he'd pressure to see a lower currency to help the export-led recovery. Australian dollar was lifted by strong building approvals which rose 8.7% mom in December. Trade surplus also came in wider than expected at AUD 1.98B.

Dollar index's rebound today suggests that a short term bottom is in place at 76.88 on bullish convergence condition in 4 hours MACD. Intraday bias is cautiously on the upside for stronger rebound. Nevertheless, outlook will remain mildly bearish as long as 78.78 support turned resistance holds. We're slightly favoring the case that rebound from 75.63 has completed at 81.44 already and fall from there is still in progress. Below 76.88 will target a retest on 75.63 low. Nevertheless, sustained break of 78.78 will revive that case that rise from 75.63 is still in progress for another high above 81.44.

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EUR/JPY Mid-Day Outlook

Daily Pivots: (S1) 112.23; (P) 112.57; (R1) 112.95; More

EUR/JPY's sharp fall in early US session suggests that pull back from 114.40 is resuming. Intraday bias is mildly on the downside for 111.41 first. Break will target 100% projection at 110.31. But still, we'd expect downside to be contained by 109.56 cluster support (61.8% retracement of 106.81 to 114.00 at 109.55) and bring rally resumption. The broader outlook remains unchanged that rise from 106.81 is the third leg of the consolidation pattern from 105.42. Above, 112.90 will flip intraday bias back to the upside. Break of 114.00 will target 115.65 and then 100% projection of 105.42 to 115.65 from 106.81 at 117.04.

In the bigger picture, price actions from 105.42 are treated as medium term consolidations to fall from 139.21. Current development suggests that rise from 106.81 is the third leg of such consolidations and should now be targeting 115.65 resistance and above. Though, we'd expect strong resistance at 38.2% retracement of 139.21 to 105.42 at 118.33 to limit upside and bring down trend resumption. On the downside, below 109.56 support, though, will turn focus back to 105.42 low instead.

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Economic Indicators Update

GMTCcyEventsActualConsensusPreviousRevised
21:45NZDUnemployment Rate Q46.80%6.50%6.40% 
00:30AUDBuilding Approvals M/M Dec8.70%1.30%-4.20%-3.90%
00:30AUDTrade Balance (AUD) Dec1.98B1.63B1.93B2.08B
07:15CHFTrade Balance (CHF) Dec1.28B1.72B1.93B1.79B
08:55EURGerman PMI Services Jan F60.36060 
09:00EUREurozone PMI Services Jan F55.955.255.2 
09:30GBPPMI Services Jan54.55149.7 
10:00EUREurozone Retail Sales M/M Dec-0.60%0.50%-0.80%-0.30%
10:00EUREurozone Retail Sales Y/Y Dec-0.90%0.20%0.10% 
12:45EURECB Rate Decision1.00%1.00%1.00% 
13:30EURECB Press Conference ---- 
13:30USDInitial Jobless Claims415K420K454K 
13:30USDNon-Farm Productivity Q4 P2.60%2.00%2.30% 
13:30USDUnit Labor Costs Q4 P-0.60%0.50%-0.10% 
15:00USDISM Non-Manufacturing Composite Jan 5757.1 
15:00USDFactory Orders Dec 1.00%0.70% 
15:30USDNatural Gas Storage -185B-174B

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