Monday November 1, 2004 - 19:36:02 GMT
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US Awaits Outcome of Presidential Election
The markets were quiet today ahead of the US Presidential election on Tuesday as we stayed in a small range thru most of the day. The dollar had a nice rebound from its early Asian session lows, to post a NY session high of 1.2051. The euro was once again unable to eclipse the offers in front of 1.2850 and rumors had it that the currency was sold by some hedge funds and middle-eastern accounts near the highs. The euro remained well supported on the dips as 1.2715 held again protecting stops reported below. The early NY trading was very subdued even after Personal Income and Personal Consumption both came in as expected this morning. Personal income came in at .2 and Personal consumption .6. The early data had little impact as the market awaited the ISM release. The ISM was reported to be strong since we had some strong numbers Friday but the dollar was disappointed as ISM came in at 56.8 on expectations of 58.5, and construction spending was flat on an expected .4 increase. The greenback was initially sold off to about 1.1995 but rebounded to post a NY high of 1.2051. The dollar looked set to post even more gains and take out stops at 1.2075 but when a rumor of a pipe line in Iraq being blown up was sent thru the market the dollar was sold off and euro jumped to 1.2765 off its 1.2717 low. Since the news we have seen little reaction in the markets and most now seem happy to wait until there is an elected President before they make there next move. Most traders seem to be very short dollars and long a considerable amount of currency namely euro. The bounce looks also to be attributed to some being worried they are to short dollars. There are some theories being thrown out there that if Bush wins it will be more subdued for the dollar because of the strong dollar policy he has been pushing the past few years but if Kerry wins we could see more of a dollar bounce as the rumor has it that he may bring former Treasure Secretary Rubin back and this could be dollar positive. The market will wait and see.
Technically Speaking: The euro looks oversold in the 1.2720 area and the hourly charts suggest the same. The Relative Strength Index is at 39 and the Slow Stochastic is at 18.12. There is still very good support at 1.2705 and stops below at 1.2680 area. The 1.2850 zone is very good resistance but a clear break of this level brings in the 1.2950 all time high back in focus.
Gain an Edge: We look to buy euro on the dip to 1.2720 with a 1.2680 stop in place, our objective is 1.2920.
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