Tuesday November 9, 2004 - 14:56:59 GMT
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Forex: Better Euro yields will weigh heavily on the dollar.
The dollar has regained a little ground in early trade, but this is being seen more as a short term adjustment rather than any longer term change of sentiment in the market. Tomorrow’s FOMC meeting may offer some further direction, but the trade deficit remains a problem and indeed a very good incentive for the Fed to permit a softer greenback over the coming months. German CPI data released today served to illustrate just where the dollar will see pressure – inflation is now running at 2% and the country is also supporting a strong current account, leaving the ECB well placed to start tightening its monetary policy. Better Euro yields will weigh heavily on the dollar, so although we’re now sitting close to the 1.29 level, any appreciation should meet resistance initially at the all time high of 1.2987, the 1.30 psychological level and beyond this at 1.3050. Near term exposure for the common currency on the downside is expected to be somewhat limited, with any support cutting in at 1.2880 then 1.2840-50. Cable continues to hold just above the 1.85 level, but with little economic data due for release from the UK this week any move higher is likely to be on the back of further dollar unpopularity. Tomorrow sees the latest US trade balance data released and this may indeed be sufficient to lift the Pound, but ahead of this we would expect to see support at 1.85 then 1.8460-70, with resistance on the topside coming in at 1.86, the recent high of 1.8616 then 1.8660.
Provided by CMC Group New York– Paul Jackson, Senior FX Dealer and Enis Mehmet, Head of Operations New York. For up to the moment FX market commentary, a 24 hotline is in place on 866-531-2604.
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CMC Group transacts over $1billion per day across its range of real-time online Foreign Exchange. It is one of the world’s leading online Foreign Exchange, Index and Equity Derivatives providers. Founded in 1989, CMC Group has operations in London, New York and Sydney. It is a member of the US NFA and ASIC in Australia. For further details on CMC Group visit www.cmcgroupplc.com.
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