Forex News 49-3

Dollar Settled Down after Mixed Data, Eye on ECB by Yan Xu

The dollar weakened initially after a series of weak U.S. economic data released in the past U.S. session. The unit labor costs unexpected fell from 3.8% to 2.3% in the third quarter, much lower than the forecast of 3.5%. The third quarter non-farm productivity also came in lower than expected at 0.2% only. The euro gained to 1.3360 versus the dollar after the weak data came out.

The other two U.S. data came out later were mixed. Factory orders fell sharply from 2.1% to ¨C4.7% in October, below the estimate of ¨C3.8%. Non-manufacturing ISM surprisingly rose from 57.1 to 58.9 in November, exceeding the forecast of 56.0. The dollar traded back to its original level around 1.3330 versus the euro after all U.S. data were released.

The market will focus on the European Central Bank's rate decision tomorrow morning. ECB is widely expected to raise rates by 25 basis point to 3.5%. ECB chairman Trichet will give a speech after meeting. If he signals further rate tightening next year, the euro is likely to gain further.

The Bank of Canada kept its interest rate unchanged at 4.25% as expected.

EURUSD will face interim resistance at 1.3350 followed by 1.3370 and 1.34. Additional ceilings will emerge at 1.3450, backed by 1.35. Support starts at 1.33, backed by 1.3280, 1.3230 and 1.32. Subsequent floors are eyed at 1.3150.