Thursday October 20, 2005 - 07:56:36 GMT
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Tricom Futures and Foreign Exchange -
Forex: The USD comes off again, but the Euro won't be able to stay up
The dollar's upward drive against the yen and the euro stalled in midday trade here, with the upside capped by some technically driven profit taking after the greenback failed to break through key resistance levels overnight.
The Federal Reserve latest Beige Book survey, released overnight, showed that moderate economic activity continued in most regions even after the damage caused by Hurricanes Katrina and Rita. However the report warned of higher prices for energy, petroleum-based products, building materials and shipping.
Market watchers also note that the US currency is likely to continue benefitting from heavy capital inflows into dollar-denominated assets, given current positive interest rate differentials
Just when you thought the USD was best thing since sliced bread, it falls away, and leaves egg on your face. The Euro managed to hold the 1.1880 area, but only just, and while it has managed to regain some lost ground, the sentiment continues to be mixed towards the single currency. There's every chance that it may trade upto around 1.2080-1.2100, before again falling away, and so maintain the 1.1900-1.2100 recent trading range. A further hurdle for the euro, is talk that the ECB is in no hurry to raise rates, and may well wait to see data in early 2006 before moving rates higher.
The overnight BOE minutes suggests the bank is no longer looking at cutting rates, but rather again concerned about inflation. This talk should help the GBP regain much lost ground.
Today’s Economic Releases:
UK: Retail Sales
US: Philly Fed Index
Today's Top Trades
- Buy EUR/USD around 1.1940-50, with stops below 1.1880
- Buy GBP/USD around 1.7570-60, with stops under 1.7520
For more ideas send me an email, firstname.lastname@example.org
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