The UK Jul Retail sales release which has increased by 2.1% y/y and the market was waiting for just 1.8% from 2.2% in June could contain the current market sentiment underpinning the cable pushing it above 1.87. The currency market was stagnant taking no clear direction from the beginning of this week. The greenback was keeping its recent gains across the broad but it is not retreating some of these gains. We wait tomorrow for the release of UK Q2 GDP which is expected to be .1% q/q and 1.5% y/y from .2% m/m and 1.6% y/y in the first quarter.

The single currency after along suffering, it could come back again over 1.481 following the cable amid better than expected flash release of EU August manufacturing PMI which is expected to be still under 50 level in the contracting territory at 47 but it came at 47.5 and the EU services PMI flash release which was expected to be 48 has come at 48.2. The single currency was still under the impact of the market focusing on the growth slow pace in Europe after the recent dovish comments of Jean Cluade Trichet after the ECB decision to keep the interest rate unchanged at 4.25%. Trichet has highlighted the growth down side risks by a serious talking about the growth down side risks. In the same time he has tried to mention that the ECB recent decision to hike interest rate by .25% was important to avoid inflation second round effect and the ECB main job is to anchor inflation and to settle price stability over the medium term in the Euro zone. It looks that the single currency has found a footing at 1.463 after a continued aggressive decline from 1.6023. Today the single currency could have its biggest one day gains since the beginning of the decline which has been accelerated after Trichet's dovish comments about growth. The pair main and very strong resistance is at 1.53 but the next key and psychological resistance is at 1.50 but at anyway standing above 1.481 is an optimistic bullish sign which can contain at least some of the recent declines.

Best wishes

FX Consultant
Walid Salah El Din
E-Mail: mail@fx-recommends.com
http://www.fx-recommends.com