Tuesday November 23, 2004 - 11:42:21 GMT
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Forex: US Market Points
Dollar – the Week of the Bounce Back? (Next Update 11/28/04)
Little surprise out of the Euro-zone tonight as the German GDP data prints generally in line with expectations (0.1% vs. 0.1% consensus). Germany now has the dubious distinction of having the slowest projected rate of growth (1.5%) among the G-7 nations, according to estimates by International Monetary Fund. Despite the lackluster top line number German GDP report registered a healthy jump in capital equipment spending (4.1% vs. 1.8% expected) and better Domestic demand (2.0% vs. 0.9% projected). As a result, the euro recovered the 1.3000 handle, which it had lost in profit taking during the Asian session.
Profit taking, however, is likely to be the theme of the week as holidays in Japan and US will keep many trading desks on skeleton crews. Speculators and hedge funds with euro long positions that have paid off handsomely over the past two weeks may want to book some profits as the pair encounters resistance at the highs of the year. Meanwhile, dealers - who have had to absorb the majority of dollar selling in the past week - will want to exploit any dollar bullish news to reduce their inventory.
One source of positive dollar news could be oil. Unseasonably balmy weather in the Northeastern United States (end of November and we are still wearing light jackets!) has reduced demand beyond the market’s expectation. The Northeast consumes 80% of heating oil in United State and with the good weather projected to last until December 1st, further decline in oil prices may occur. “Given the current situation of surging inventories and waning worldwide demand, it is my view that oil should not be over $40, much less $48,'' said Jason T. Sunderland, an independent oil trader in New York. If Mr. Sunderland is correct, falling oil could provide just the right excuse for traders to create a EUR/USD counter-trend retrace as the week proceeds.
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