Closed in NY at 1 4330 off fresh 2011 highs of 1 4350

EUR/USD

Range: 1.1.4291 – 1.4337

Support: 1.4270

Resistance:1.4350

Closed in NY at $1.4330, off fresh 2011 highs of $1.4350. Rate initially marked Asian session highs of $1.4337 before squeezing lower through the overnight session, a mix of reaction to the overnight news of Portugal asking EU for aid (though no details have been given with market seeing loan needs in the region of E70-80bln), as well as position adjustment and profit taking ahead of this afternoon’s ECB rate decision, and more importantly Trichet’s presser at 1230GMT. Rate pressed down to an initial low of $1.4301, recovering to $1.4315 before getting pressured to overnight lows of $1.4297 ahead of the European open. Dip quickly attracted in fresh demand into the European session, with rate currently trading around $1.4310. A 25bp hike is well priced in with reaction to this outcome expected to be muted. Trichet hawkishness will be gauged in his accompanying presser, markets having priced in a total of 3 rate hikes for 2011 (including today), support for this view will further boost euro, any divergence could prompt a sharp sell off.

GBP/USD

Range: 1.6260 – 1.6324

Support:1.6260

Resistance:1.6320

Rate traded to an overnight low of $1.6294, with follow on sales into early Europe, a UK clearer reported to have sold stg500mln, taking rate on to $1.6260. The recent macro-economic data remains inconclusive and as such the MPC will likely wait until they receive updated CPI/GDP projections, as well as the Q1 GDP print in May, rather than risk stifling growth altogether. Nevertheless, the BoE has struggled to contain the recent rise in inflation which is expected to continue to rise and reach its peak by midyear. This in turn resulted in market participants pricing in aggressive monetary policy tightening in spite of the fact that the Coalition government’s austerity measures are front loaded into 2011 and expected to hit consumer spending/investment behavior. To conclude, anything apart from an unchanged decision on both the Asset Purchase Program and interest rate is seen as an outside chance and will result in volatile price action. Instead, should the BoE stick to the consensus view, a bout of profit taking is expected to be observed post the announcement.

AUD/USD

Range:1.0422 – 1.0480

Support: 1.0400

Resistance: 1.0500

Posted a fresh post float high in NY yesterday of $1.0452 on the back of aussie-yen demand and opened in Asia this morning at $1.0446. The pair edged lower to $1.0421 in early trade on some mild profit taking before soaring to a new high of $1.0489 on release of the very strong employment data. A large barrier at $1.0500 deterred further gains with the pair easing back to $1.0450 later in the session on option related supply and some profit taking in aussie-yen. Aussie-yen opened at Y89.23 after a NY high of Y89.28 and slipped in early trade to Y88.94 before the data release, which saw the pair leap to a 30 mth high of Y89.48 paring back later to Y89.00.All eyes will be on the ECB rate decision today as the euro has so far failed to follow the aussie move, slipping in Asia as Portugal asks for a bailout from the EU with further falls possibly weighing on the aussie.

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