Wednesday February 23, 2005 - 18:42:14 GMT
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Dollar rebounds slightly
The dollar gained against its G-7 counterparts as some backtracking by the Bank of South Korea spurred the short term correction that was so painfully absent in yesterday’s trade session. In a difficult move, EUR/USD fell from 1.3265 to 1.3187 only to bounce back to 1.3240 while USD/JPY traded up from 104.60 to 105.12. Meanwhile, EUR/JPY charged higher (138.12 to 138.77) as did USD/CAD (1.2310 to 1.2452). As a matter of fact, it could have been the move higher in USD/CAD that tricked some traders into establishing or unwinding USD short positions at bad levels. Looking at today’s trading a little more closely, there appeared to be some large Merger and Acquisition activity involving a large US airplane maker that required the purchasing of 1.5 billion USD/CAD. And due to the fact that USD/CAD is not the most liquid of currency pairs, it is likely that its move higher was overextended. So as is usually is the case, once the buy order is completed the market adjusts back to appropriate levels. We look for USD sellers to emerge as long as 1.3120 and 105.50 stay in tact.
We see solid support in USD/JPY now at 104.60 and 104.25. There is resistance at 105.10 and 105.60. The 106.00 offers psychological resistance
GAIN AN EDGE
We will sell USD/JPY at 105.50 with a 106.00 stop and 104.65 limit.
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