Thursday August 26, 2004 - 09:52:14 GMT
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INVESTICA Ltd - www.investica.co.uk
Greenspan likely to be optimistic
Dollar optimism should remain firm in the short term with the markets expecting an upbeat commentary from Fed Chairman Greenspan on Friday. A further reduction in oil prices will also ease fears over US growth trends. There will be longer-term Euro buying interest below the 1.2070 level and there will also be a further near-term defence of a large Euro option position at 1.2050. Euro support at 1.2050 should hold.
The Euro has found good support at the 1.2050 level against the US currency, but it has been unable to push above 1.2120. There has been evidence that a large option position has been defended at1.2050 and this is likely to continue in the short term.
The headline US durable goods orders data was stronger than expected at 1.7%, but growth excluding the transport sector was held to 0.1%. New homes sales were weak with a 6.4% decline. There will be some longer-term concerns over the housing sector but, for now, optimism over the US economy is likely to be sustained, especially as energy prices have declined.
The comments from Fed Chairman will be important tomorrow and the remarks from other Fed officials this week suggest that Greenspan will be generally optimistic over the US economy. This confidence will offer near-term dollar support, although there will be additional pressure on forthcoming data and the dollar will be more vulnerable if the September data is disappointing. There is also a high risk that second-quarter GDP growth will be downgraded.
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