Friday October 1, 2004 - 10:25:42 GMT
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INVESTICA Ltd - www.investica.co.uk
Dollar needs strong ISM report
The Euro push through important resistance yesterday will undermine dollar sentiment and the markets will want to push the dollar down towards at least the 1.2450 level. The Euro has also probably entered a higher range. There will also be caution ahead of the G7 meetings and doubts over US economic trends. There will, however, be profit taking on long Euro positions ahead of the weekend and the US data was still firm yesterday. The Euro will find it very difficult to mount a convincing push above 1.2450 in the short term unless US data is very poor today.
The Euro pushed up to challenge the 1.2350 level in early New York on Thursday and dollar support was weaker than expected there with the dollar losing support. There was evidence of speculative Euro buying and option-related buying as well. The Euro pushed ahead strongly to a high of 1.2435, the highest since July, and the dollar also suffered broad-based losses. The Euro push above 1.2350 will undermine overall dollar sentiment, but the Euro will still face tough resistance as it approaches the 1.25 level, especially as there was very tough Euro resistance here in July.
The US data overall was broadly neutral as a disappointing jobless claims report was offset by a firm Chicago PMI index. Jobless claims rose to 369,000 in the latest week from 351,000. The ISM report will be significant today with markets looking for a figure around 58.3. A figure below 55 would cause further damage to dollar confidence, although the more likely outcome is that the figure will be relatively firm.
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