Tuesday July 20, 2004 - 09:51:24 GMT
Share This Story
INVESTICA Ltd - www.investica.co.uk
Dollar: Caution ahead of Greenspan
The dollar's immediate direction will be set by Greenspan. His tone may offer some slight support to the US currency, but is unlikely to be strong enough to dispel overall bearish sentiment. The scene should be set for a tough battle around the 1.25 level. Medium-term dollar losses through this level are likely given weak fundamentals, but the number of short dollar positions suggests that a significant correction will be needed first with long Euro positions offering little immediate value above the 1.2480 level.
The Euro found support at 1.2390 against the dollar and pushed back to 1.2440 in early Europe on Tuesday, with market caution ahead of Fed Chairman Greenspan's testimony today preventing aggressive moves.
Greenspan is likely to maintain a balanced view on the economy and inflation threat. The most likely outcome is also that he will repeat the Fed's aims for a measured tightening of monetary policy. He may choose to take a slightly harder line on inflation and this could offer the dollar some support, but aggressive dollar gains appear unlikely, especially as Greenspan will not want to upset the bond and equity markets. If he casts doubt on a series of rate increases, the dollar will be vulnerable to heavy selling pressure, but this is an unlikely outcome.
Underlying dollar sentiment will remain dollar negative, but there will need to be further caution given the substantial number of short dollar positions. Without positive US currency surprises, there is likely to be a tough battle between the Euro and dollar around the 1.25 level.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."