The single 16-nation currency, the euro, slumped versus the dollar today after the unexpectedly strong decline in European confidence according to ZEW; the index retreated to 48.0 and labor costs declined strongly indicating that the jobs market remains fragile which in return will keep the lid on inflation and pipeline which will delay expected moves by the ECB on interest rates. Sterling on the other hand also declined, yet dedicated to preserving its trading above 1.62 barrier and is still above the lowest set this week after inflation data ignited expectations that the economy might have indeed returned to growth in the current quarter easing the jitters over the prospects for the economy.
We can see that the euro and sterling are under strong negative pressures which are surely intensified by the strength of the dollar. Investors are eyeing the return of the dollar era as stability is resuming to the financial sector and the markets are impatiently waiting for the FOMC decision tomorrow to confirm the stability in the U.S economy. Though the pace of recovery still looks sluggish, still investors are optimism over the prospects for the economy, especially as banks are announcing payback of funds acquired from the government which added to speculation that the feds might indeed adopt a new rhetoric and expect a sooner than expected move by the feds on interest rates increasing the appeal of greenback across the board.
The euro declined against the dollar today from its highest set at 1.4662 after the negative data supported the currency in breaching 1.4605 which accelerated the downside move towards 1.4524; the pair is still trading around its lowest set for today, nevertheless, the pair should stabilize below 1.4535 to test the most important support at 1.4475 or else the pair will incline to test the resistance at 1.4625 to gain more bearish momentum to set the breach for the awaited level at 1.4535.
Sterling is now trading among 1.6185 and the resistance at 1.6240 in heavy volatility in an attempt to stabilize among 1.62 levels. The pair declined today affected by the dollar's strength from 1.6318 to record its lowest so far at 1.6217 and despite the negative pressures on the pair, the inflation data eased the decline. Stabilizing above 1.6155 might cause a resumption to the upside correctional move towards 1.63 areas and momentum indicators support that move; where today without stabilizing below 1.6185 and 1.6155 might make it difficult for the pair to attain the completion of the bearish move.
As for the Japanese yen, it is currently trading bearishly versus the dollar, where the pair indulged in an upside wave rising from 88.56 towards 89.43. The Chinese comments over possibility to curb excessive acceleration in properties prices weighed heavily on the region that the rapid acceleration pace might slow as other economies follow and monetary tightening continues to affect the region while the Japanese economic prospects will be affected. Therefore the dollar strength dominated and regained yesterday's losses; technically speaking, consolidating above 89.55 might accelerate the upside move towards 90.00 areas.