Thursday May 27, 2004 - 18:22:57 GMT
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Greenback gets CRUSHED
The greenback suffered a major setback today against all its counterparts, falling to four-week-plus lows against the Euro, Sterling, Yen, and Canadian dollar. While there was nothing individually of great significance to justify the collapse, the paranoia about terrorism still seem abound, with one dollar sell-off being triggered when explosives were found near a building in Eastern Europe where NATO officials are scheduled to meet tomorrow. The Euro rocketed after the relatively neutral economic data (344k jobless claims and 4.4% GDP growth) to a high of 1.2280/85, gaining a whole percent in a brisk move. The pound followed fiercely in pursuit, after comments from BoE policy maker suggesting that interest rates in England will need to rise further, and will leave the strength of the economy unchanged. As we approach the long Memorial Day weekend, skittish investors might choose to remove assets in the USD and take it to safer havens like the CHF and EUR. The other interesting question is whether the dollar sell-off might raise doubts in the market as to whether the expected rate hike will actually happen in June. This could lead to further weakness in the dollar, as some traders might pare their bets on Fed rate increases.
TECHNICALLY SPEAKING The Euro has erupted through key resistance at 1.2180 and also through 1.2220 as well. The Relative Strength Index is a very positive 78.45 on a 60 minute chart. There is near term resistance at 1.2300 and trend line support seen at 1.2220/30 and below at 1.2180. The ADX is also showing a strong reading of 40.25. Euro is also forming a pennant on the same 60 minute chart which is bullish for this trend.
GAIN AN EDGE We look to buy Euro at 1.2190 with a stop below 1.2150 with a target of 1.2325
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