The foreign currency markets are relatively quiet this morning. Volume is light and the U.S. Dollar is trading mixed against the major markets.
The June Euro is trading under pressure this morning. This follows a strong rally following the Greek aid package agreement and speculation that the European Central Bank will hike rates again in July.
The ECB voted on Thursday to leave interest rates alone, however ECB President Jean-Claude Trichet hinted that the next hike will take place in July. While this is bullish news, the rally stalled and the Euro broke after Trichet also implied that a July hike could be the last for quite a while.
Although the European economy has been strong, citing the main reason for the impending interest rate hike, it is possible that Trichet and the rest of the ECB board is looking down the road at the possibility of a continued weakness in the U.S.
So while we have the interest rate differential helping to point the Euro higher, continued economic growth is needed to sustain the rally. An economic slow down along with lingering sovereign debt issues could ignite the start of a near term break.
Technically the charts look as if this market is headed to a key 50% level at 1.4329. This price represents value and could be attractive to fresh buyers.
