Dollar Index (DXU8):

The DX opened higher at 72.385 and slid to a morning Lo of 72.305 after the ECB raised s/t rates 25bp to 4.25% and Non-Farm Payrolls showed  a loss of 62,000 jobs. Traders were disappointed by ECB President Trichet's statement that the slowing EZ economy would not benefit from further rate hikes, which sent traders on a profit-taking binge that sent the EC tumbling to a mid-day Lo of 1.5625. The DX benefitted by short-covering and the sector rotation out of the EC, as traders looked ahead of today's economic data and at the likelihood of a probable rate hike at the Oct. 28-29 FOMC meeting. The DX rose to a morning Hi of 73.295, before trailing lower into the Holiday shortened session, ending the day at 73.06, up 72 tics. The close above the 9-day MA changes the s/t trend to 'positive' w/ improving momentum indicators. The short-covering rally hit stops above, accelerating the rally and will need follow-thru to continue higher as we start next week. Longs should tighten 'stops' or buy 'puts' to reduce exposure. A higher open should find Resistance at 73.46 and 73.87, while an open below 72.88 may find Support at 72.47 and 71.89. 

Euro Currency (ECU8):

The EC opened 'flat' at 1.5828 and rose to a morning Hi of 1.5853 after the ECB followed through on its proposed 25bp rate hike, raising the s/t lending rate to 4.25%. Traders were focusing on the follow-up statement by ECB President Trichet to see if the ECB would continue to focus on fighting inflation with additional rate hikes. The tone of the statement was not as 'hawkish' as traders needed to look for higher prices, as Trichet reflected a slowdown was likely in Q2 and continued rate increases were 'unlikely'. The sell-off was quick and deep, as traders took profit/risk off the table and sell stops were hit, accentuating the move lower. Spec's rotated into the DX, looking for a hike at the Oct. 28-29 FOMC meeting. Prices fell to a daily Lo of 1.5629, before bouncing into the early Holiday close of 1.5639, down 189  tics. We could see some short-covering as the increased yield-gap may attract an opportunity for s/t carry-traders, should risk-aversion decrease. A lower open may find Support at 1.5558 and 1.5478, while an open above 1.5706 should find Resistance at 1.5786 and 1.5934.