Thursday July 15, 2004 - 19:09:53 GMT
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MOMENTUM DRIVING THE GREENBACK
The dollar posted steady gains against all of its G-7 counterparts behind a strong Philly Fed reading. EUR/USD knifed from 1.2380 to 1.2325 while USD/JPY rose from 109.05 to 109.99. Meanwhile, GBP/USD came within an earshot of breaking through the key 1.8470 support (1.8566 to 1.8473) as USD/CHF managed to overtake (albeit briefly) the psychologically important 1.24 handle (1.2315 to 1.2408). So now traders must let today’s smoke clear and refocus their attention on tomorrow’s crucial CPI release. A benign reading is likely to cause traders to unwind long dollar positions put on today especially against the higher yielding British pound and Australian dollar. But a strong CPI will likely cause key medium term supports at the aforementioned 1.8470 in GBP/USD as well as 1.2300 in EURUSD and .7200 in AUD/USD to give way. We will keep a close watch on those levels.
TECHNICALLY SPEAKING There is key support in GBP/USD in the old resistance area of 1.8470-80. Below there, it looks as if 1.8416 and 1.8375 serve as the next candidates for a potential short term rebound. The topside shows congestion at today’s high 1.8560-70 and 1.8665 was the weekly high.
GAIN AN EDGE We will sell GBP/USD at 1.8470 with a 1.8380 target and 1.8515 stop loss.
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