Tuesday August 24, 2004 - 20:25:58 GMT
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Mystifying Dollar Rally
The dollar traded higher on back of a lower EUR/JPY and lower GBP/USD. In frenetic action, EUR/JPY knifed through key support at 132.90 en route to a 132.05 low while GBP/USD tanked from 1.8105 to an astonishing 1.7885 low. Meanwhile, EUR/USD dropped from 1.2165 to 1.2059, and USD/JPY remained capped ahead of the option protected level of 110.00 only to dip back to a 109.40 low. Existing Home Sales came in worse than expected, triggering a 1.2139 high in EUR/USD immediately reversing down to a low of 1.2159. The oil slide continued from the recent highs of 49 USD a barrel to 44 USD a barrel, surely initiating a heavy dosage of Yen purchases. But for the most part, the market remains totally perplexed by this latest stunning dollar rally. There are still trade deficit and geopolitical issues for the greenback to deal with, not to mention tomorrow’s important US Durable goods report. Don’t be surprised to see a weaker than expected outcome (Expectation 1%), which could cause a nasty pullback in the recent USD surge. We also look to fade dollar rallies into the week with the heightened anticipation of possible terrorist action on the verge of the Republican Convention held next week in NYC.
We see good long term support on a 120 minute chart around the 1.2035 level in EUR/USD. If broken we could see support at 1.1980 tested. To the upside look for for first resistance of 1.2130 and second at 1.2180.
GAIN AN EDGE
We look to buy EUR/USD into 1.2057 and 1.2047 with a 1.2030 stop and 1.2100 and 1.2150 objective.
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