Thursday May 20, 2004 - 18:47:57 GMT
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Trading off Fundamentals.
The Greenback rallied through relatively weak economic data against its European counterparts. The jobless claims came in slightly worse than expected at 345k versus an expected of 328k, and then Leading Indicators were slightly off target at 0.1% instead of the consensus of 0.2%. Despite being pounded overnight, both the Euro and the sterling couldn’t recover to stage a full-fledged recovery. Euro popped upto 1.1945/50 after the number, before collapsing again, and Cable ran out of steam at the 1.7750 level. In an unexpected response to a weak Philly Fed number, the dollar rallied some more before leveling off at the 1.1900 level. The explanation for today’s dollar strength relates back to the theme of rising interest rate expectations, as opposed to short-term economic data.
Against the Canadian dollar, the greenback took a nasty spill, with the former posting its biggest 2-day increase since late March. The speculation that a growing economy may prompt higher rates was the main catalyst behind this move. With no more economic data left for the week, we will probably see a mild Friday, with light, range-bound trading.
Technically Speaking: The dollar took worse than expected numbers today and managed to climb near the highs a few times before stalling at 1.2920. There seems to be a base forming now at 1.2850. The slow stochastic is reading 77.41 and the RSI is 61.7; positive hourly readings on both charts.
Gain an Edge. We look to buy a dip in the dollar to the 1.2845 and leave a stop loss below 1.2820 with a 1.3045 take profit.
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