Wednesday May 12, 2004 - 19:15:15 GMT
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Dollar under fire
The dollar gave back some of its gains from earlier this week after a record low trade deficit worried investors that the current account deficit is still a major problem. The trade deficit widened to $46B for March, worse than economistsí expectations. The Euro was trading in the 1.1850 range before the release, and then proceeded to stage a recovery to 1.1940 before drifting lower. The question now arises whether this newfound data, coupled with surging gas prices and a plummeting stock market, will affect the market prediction that the Fed is going to hike rates as soon as June. It thus appears that some risk is going to be taken off the table as we approach the data-heavy end-of-week, with long dollar positions being squared away. For the moment, the Euro seems bid and could test the 240 minute moving average at 1.1970. On the downside, 1.1760 will be a key level of support. In other currencies, the British pound rally was further catalyzed by a BOE report that inflation may accelerate beyond its 2% target rate, boosting speculation that there might be a rate increase.
Technically Speaking: The euro failed to breach the 1.1950 level today, and although daily trend lines are looking bid for the euro we could see another dip to the 1.1750 area again. The slow stochastic is looking healthier today at 64.53 and the RSI is 57.32 on the hourly charts this makes us believe we could also still head back to 1.2130.
Gain an Edge. We will go short at 1.1935 with a stop reversal at 1.1950; we will buy back our short position at 1.1750 or sell our long position at 1.2030.
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