EUR USD weekly

The euro appreciated vis-à-vis the U.S. dollar last week as the single currency tested offers around the $1.5460 level and was supported around the $1.5145 level. The pair gained about 170 pips last week. Philly Fed’s Plosser said the Fed may normalize policy quickly when conditions warrant. Fed chief Bernanke called on lenders to enact “vigorous solutions” to counter mortgage foreclosures. The Fed’s Beige Book saw eight of twelve Fed districts report softening economic activity. The Fed announce it will increase its TAF liquidity provision to US$ 100 billion, announced another US$ 100 billion in 28-day repos, and announced it is in close consultations with central banks on liquidity provision. San Francisco Fed President Yellen sees inflation waning while Dallas Fed President Fisher warned against expecting automatic repeat Fed rate cuts.

The ECB kept its refinancing rate unchanged at 4.0%. Trichet cited “short-term upward inflation pressures.” The ECB raised its 2009 inflation forecast to a range of 1.5% to 2.7% and reduced its GDP growth forecast to 1.7% for 2008. Trichet said he is paying “extreme attention” to the U.S’s strong dollar policy.

ECB’s Liebscher said the price of oil is “crucial” to monetary policy. Ecofin finance ministers stepped-up verbal intervention against the euro’s rise. ECB’s Weber said the prospect of lower EMU-15 GDP growth “is not enough reason” to anticipate weaker inflation pressures.

Data released in the U.S. last week saw February ISM manufacturing fall to 48.3 from 50.7 with the prices paid sub-index narrowly lower at 75.5; January construction spending fell 1.7% m/m; January factory orders fell 2.5% with ex-transportation off 0.4%; ISM non-manufacturing improved to 49.3; ADP February payrolls evidenced a jobs loss of 23,000; Q4 productivity increased 1.9%, down from 6.3% in Q3; unit labour costs rose 2.6% in Q4; weekly initial jobless claims rose 29,000 to 2.831 million; January pending home sales were off 19.6% y/y; weekly initial jobless claims were up 29,000 to 2.831 million; January pending home sales were off 19.6% y/y; February non-farm payrolls growth were -63,000 with a cumulative downward revision to December’s and January’s tallies of 46,000; and the February unemployment rate was 4.8% with average hourly earnings up +0.3%.

Data released in the eurozone last week saw EMU-15 HICP unchanged at 3.2%; EMU-15 February manufacturing PMI printed at 52.8; EMU-15 January industrial product prices rose 0.8% m/m and 4.9% y/y; EMU-13 Q4 GDP were up 0.4% q/q and 2.2% y/y; the EMU-15 service sector PMI index improved to 52.3; EMU-15 January retail sales were up 0.4% m/m and off 0.1% y/y; German January manufacturing orders fell 1.5% m/m; and German January industrial output was up 1.8% m/m and 6.9% y/y.

Technical Outlook

Last week’s high (1) was a new lifetime high and last week’s low (2) was above the 38.2% retracement of the 1.4438-1.5460 range. The 1.5520/ 1.5854 levels represent upside resistance targets while the 1.5219/ 1.5069/ 1.4979/ 1.4813/ 1.4716/ 1.4631 levels represent downside support targets.