Thursday May 27, 2004 - 09:34:51 GMT
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INVESTICA Ltd - www.investica.co.uk
Dollar likely to weaken further
There is scope for a further near-term dollar retreat due to caution ahead of crucial economic data next week and doubts over the pace of Fed tightening. Some renewed interest in high-yield currencies will tend to reinforce this trend. The most likely outcome is for a gradual Euro strengthening towards 1.2225, with the dollar reaction at the 1.2225-1.2250 resistance band crucial for medium-term prospects.
The Euro pushed to a new monthly high of 1.2170 in early Europe on Thursday. Tensions will increase ahead of the important economic data next week due to doubts that the Fed will tighten in June, especially in view of high oil prices. A strong employment report next week would, however, be likely to revive interest in the dollar.
The US data did not offer any support to the US currency with durable goods orders falling by 2.9% in April after a revised 5.7% increase in March, although the underlying figures were still strong. There was also a 11.8% drop in new home sales, the latest decline since January 1994 and there will be some fears that the rise in long-term interest rates will start to damage the housing sector.
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