Tuesday February 22, 2005 - 18:57:50 GMT
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DOLLAR ROCKED BY ASAIN SHUFFLE
There were three driving forces in the lower Dollar overnight and again for the N.Y. session that saw continued exiting of long Dollar positions. First came new rules issued by the Bank Of China allowing some firms to keep all foreign currency earnings and let others keep foreign exchange income for longer periods, previously, companies could only retain up to 20 percent of their foreign exchange income. Bk. of China did not clarify which kinds of companies could keep all of their foreign exchange earnings but said they could do so according to their operational needs. New rules effective March 1. Second was news that the Bank of Korea was going to diversify a large part of South Koreas foreign exchange reserves that had previously been held in U.S. treasuries. These reserves climbed to a record 220.2 billion last week. And third were comments by George Soros that had him state “Oil producing countries will indeed move away for the U.S. Dollar in the near future.” This sent Dollar/Jpy on a free fall from yesterday’s holiday session close of 105.60 to London lows of 103.83 just before N.Y. took the baton. Euro on the other hand saw steep gains trading from yesterday’s close of 1.3055/60 to N.Y. trading highs of 1.3245. Tomorrow brings CPI at 8:30 am EST.
There is resistance seen on a 60 minute chart in $/JPY at 104.50. This was a key technical level on the move down last night. There is further resistance seen at 104.75/90 as well. There is support seen at 103.75/85 and just below at 103.35/40. There is also trend line support seen at 104.00/05 in the near term. The Relative Strength Index is waning.
GAIN AN EDGE
We look to sell a rally in $/Jpy to 104.65/80 with a stop above 105.25 and a take profit of 103.90 for half the position and 103.60 for the remaining half.
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