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Here are comments from Forex News regarding possible intervention from ECB. If that is the case, excellent buying oppurtunities will abound.

Friday 13th for Euro Speculators? by Ashraf Laidi



It surely felt like Friday 13th for short-term euro speculators. What started with an explainable 1-cent rise following disappointing trade figures and poor sentiment survey from the US, led to an unusual 120-pip plunge (1.3%) in the currency by some unusually strong profit-taking.

The deterioration in the US trade figures December to $42.48 billion in December accompanied a 3.0% increase in imports to an all time high of $132.8 billion and a 0.2% drop in exports to $90.37 billion

The rise in imports was largely attributed to the 7.00% increase in petroleum imports, which was the highest monthly percentage increase since June 2003.

This report poses the important question regarding the trade deficit. Will the benefits of a weak dollar on US exports be offset by the upward impact on rising imports?

So far, the import pass-though from the weak dollar has been relatively tempered, thereby showing little impact on US import prices. But with oil prices settling near the $35 per barrel and the strength in commodity prices not likely to abate as long as China’s growth rate accompanies the rise in global recovery, the import-pass through could be expected to pick up further.

Dollar Weakness Cemented by G7 and Greenspan: Going into today’s US trade figures, the dollar was likely to weaken even in the event of a better than expected number as markets reason that further dollar weakness is a requirement for a decline in the deficit. This was clearly articulated by Fed Chairman Greenspan in his testimony this week.

Both the G7 statement on currencies and Chairman Greenspan’s testimony contributed to exacerbating this week’s dollar slide. Since the G7 finance ministers issued a statement that was nearly identical to the Dubai statement, which preceded the accumulated deterioration in the currency, traders interpreted the decision to be European complacency. Greenspan’s tacit support for a weak dollar during his testimony was the other factor.

Intervention or not? Today’s sharp drop in the EURUSD from its $1.2891 high to $1.2750 triggered rumors of intervention from the European Central Bank. But traders’ chatter referred to profit taking from a large German bank for a pension fund and European orders for Middle East accounts. While these possibilities are valid, it remains odd for the euro to sustain a full cent plunge in less than 20 minutes at a time when the uptrend was accelerated following the deterioration in the US trade figures and the 10-point slide in the University of Michigan Sentiment survey.

Unless the ECB makes credible warnings against the euro rose, markets will surely force the central bank’s hand in the next weeks. But with the Federal Reserve having further elucidated its intentions to maintain low interest rates as long as jobs remain weak, it is only a matter of time for the ECB’s verbal jawboning to turn into actual selling.