Monday August 2, 2004 - 09:47:55 GMT
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INVESTICA Ltd - www.investica.co.uk
Dollar will face resistance
The US data has not seriously damaged US optimism, but there will be caution ahead of the Friday employment report. Terrorism concerns will also unsettle the dollar. Overall, the dollar is likely to hit further tough near-term resistance at the 1.20 level, and this level will be very difficult to break ahead of Friday's figures. The Euro will need to push through 1.2125 to make any strong headway.
The dollar remained volatile on Friday, with weaker than expected US data following the Euro to strengthen back to 1.2110 before retreating back to near 1.20. The dollar weakened on Monday back to 1.2075.
The US GDP figures were weaker than expected at 3.0%. The potential dollar damage was offset by a strong reading for the Chicago PMI report which maintained optimism over a renewed acceleration in the economy. The data this week will be important for the dollar, with a particular focus on the Friday employment figures.
The US currency will be unsettled by terrorism concerns after the decision to raise the alert status on US institution such as the New York Stock Exchange after intelligence reports that they would be targeted. These fears will unsettle the dollar, especially if there is a negative reaction on Wall Street today although substantial dollar selling is unlikely at this stage.
The Euro-zone PMI index was in line with expectations with a rise to 54.7 in July from 54.4. There will be particular relief that the German economy is strengthening which will offer mild Euro support.
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