Thursday December 28, 2006 - 11:40:17 GMT
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INVESTICA Ltd - www.investica.co.uk
Dollar needs to break 1.31
The US growth data on Thursday will be important for near-term dollar direction as a robust series of data would boost confidence moving into the 2007 and encourage a reassessment of dollar sentiment. Short-term Euro support will still be strong close to 1.31.
Trading conditions will remain subdued with liquidity low between the Christmas and New-Year holidays and the dollar was close to 1.3125 in early Europe on Thursday before a retreat to 1.3150.
The US new homes data was slightly stronger than expected with a monthly increase of 3.4% to an annual rate of 1.05mn. There was a drop in average prices for the month, but inventories also fell over the month which will ease concerns that heavy price discounting will be required to support sales.
The US data will also be important on Thursday as an increase in existing home sales, coupled with stronger consumer confidence and a firmer Chicago PMI index, would be important in boosting confidence over the economy‚Äôs 2007 prospects. A batch of weak data, however, including falling home sale and another Chicago figure below the 50.0 level, would revive expectations over a first-quarter Federal Reserve interest rate cut which would undermine the US currency.
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