Yesterday we saw dollar gaining for most of the day, with euro bulls trying hard to sustain move up to 1.4785 and as a result the move faded with renewed dollar strength. The markets are in a wait and see mode these days, and the fact that today is the end of the week as well as month, is making trading a little choppy as market players closing their profits.

Today we have a few economic releases out of the US, with consumer spending being the most important, along with Chicago PMI.

As we have noticed in the past few sessions, traders are completely ignoring the news and the only announcements that really move the markets are any that have to do with the rate outlook.

Comments by both vice president Kohn and Bernanke recently gave traders the impression that the bank will move to further rate cuts by even a 50 pbs. That gave EUR/USD a temporary lift, but the pair found resistance again at 1, 4785, where it retraced quickly.

All eyes will be on next weeks ECB monetary policy meeting, as Trichet will comment on current rate outlook and hopefully he will give us more clues as to what the next move by the bank will be. Most analysts believe that ECB will put rates on hold for the coming months and even be pressured to cut, if European growth starts to deteriorate. The other next big thing for traders will be next week’s payroll data which will be very crucial for greenbacks short term future. FED said that one of the main focuses on their decision will be this number as the employment numbers are always important for economic growth. Most analysts forecast a lower number after last months 166K took markets by surprise.

However, the main question at this point is what happens with EUR/USD? Will it continue the recent consolidation, before resuming the move towards 1.50? Or will we see the euro bulls back on track ready for more dollar blood? There are many who think that dollar found bottom at 1.4967 and the recent strength in the American currency is the beginning of the end for dollar suffering. However, with more potential negative data and further cuts by the FED, dollar bulls have a difficult task to get bank in the game!

EUR/USD levels to watch will be: 1.4785 as at the time of writing it has formed a triple top. If that level gives way, then next resistance will be found at 1.4825-50 and the pair will be looking to continue the marathon up to 1.50. On the downside, we still have 1.47 holding steady as a potential break will put pressure for further dollar gains and the long awaited 1.4620. Basically whatever comes first it will give a good trading opportunity for continuation of the move at least for 50-60 pips…