Friday August 25, 2006 - 10:46:37 GMT
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INVESTICA Ltd - www.investica.co.uk
Positioning bias undermines Euro
The Euro attempted to push stronger after firm German data and again after weak US data, but was unable to strengthen above the 1.2850 level and weakened back to 1.2760 in New York. The Euro remained on the defensive in early European trading on Friday, but found support close to 1.2750.
The headline US durable goods orders data recorded a bigger than expected drop of 2.4% for July. There was, however, a big drop in transport orders with an underlying increase in orders and there was a firm core capital goods increase of 1.5% for the month which suggests firm underlying industrial demand. New home sales weakened by 4.3% to an annual rate of 1.07mn with inventories at an 11-year high. The data matched the trend seen in the existing housing data reported on Wednesday and the medium-term implications of a sharp slowdown in the sector are negative for the US currency.
The Euro will still be vulnerable to position adjustment in the short term despite relief over Thursday's IFO index and the speculative positioning data will be watched closely over the weekend to assess the number of long positions still in the market.
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