Monday July 4, 2005 - 09:33:22 GMT
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Dollar surges as economic data confirms bullish view
Good morning everyone from FXstreet.com. Most bourses around the globe are making new highs along the way now that the crude oil has given them a relief. This seems to be the name of the game for now: oil rising, bourses waiting .. oil declining, bourses making new highs. Check out Latest Forex News section to review overnight economic stories.
Forex Technicals at a glance
The clearing of the 1.20 level confirmed the dollar bullish momentum after FED rate move and the previous weeks’ gains. That the dollar had started a big rebound wasn’t out of question on february, according to technical indicators. The question was: when? Successive FED moves have helped the technical indications to work in full force, causing a major trend reversal 2-3 months ago, when we saw the eur/usd breaking below the 1.2770 level on a daily closing basis. That was the definite signal for dollar bulls to run bearish stops away and start the trend reversal. There were many skepticists who did not believe in what charts were telling, mainly because those trend reversal signals had appeared twice before with no effect. But the third time was the real one. And the trend reversal is a real fact. I guess we won’t hear that “buy euro, it is cheap” expression for some time. Pound has crashed more than any other continental major against the dollar, weak economic data was the catalysator for the 700+ pip downmove in just 3 sessions. Dollar is even gaining ground against commodity currencies, like the canadian dollar. Volatility is extraordianry these days, signaling the move is almost over and we more than likely will see a consolidation market in the coming weeks.
Point of View: Current interest rate policies are causing a shift on currency preferences. The euro has been the desired currency by “the big money” for almost 3 years, where it hasn’t stopped climbing. The almost-null economic policy in the eurozone has caused some big players to shift their attention back to the almighty dollar, realizing that the authorities in the US are far more competitive and worth the risk of holding that currency than the europen one. When “the big money” comes into play, trends are set. Now the trend is set.
Trading Tips:After clearing the 1.2000 level on the downside against the dollar, the euro is a weak currency. I expect it to fall a bit more than current levels with respect to the british pound, with levels around 0.6750-25 as objectives.
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