Monday May 24, 2004 - 09:41:25 GMT
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INVESTICA Ltd - www.investica.co.uk
Dollar range trading likely
A further period of range trading is the most likely outcome, especially with no major US economic data due for release this week. Overall, the dollar is likely to hit resistance in the 1.1920 region and failure to strengthen through this level would undermine dollar sentiment slightly. There is the potential for a fresh Euro challenge on 1.2050 and the odds just favour an eventual move to 1.2120 even though initial attempts will probably fail.
The G7 ministers failed to make any significant comments on exchange rates, satisfied by developments over the past few weeks. The Opec meeting was potentially more significant with Saudi Arabia pledging to increase output despite opposition from other Opec members. The net implications of any sustained decline in oil prices would probably be marginally dollar supportive in the short term due to reduced fears that the US economy will slow, although uncertainties over the economic trends will persist in the absence of fresh data.
The latest IMM data recorded a small increase in long Euro positions of close to 1,000 in the latest week, pushing the total to 13,500. This suggests that there has been further interest in buying Euros on recent dips and this could offer long-term Euro support. The net long position of around 13,500 will, however, act as a barrier to substantial Euro gains.
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