Tuesday August 31, 2004 - 09:51:23 GMT
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INVESTICA Ltd - www.investica.co.uk
Forex: Caution ahead of payroll data
There will be considerable market caution ahead of the key US employment report on Friday. There will be some unease over the terrorism threat during the US Republican convention which will deter long dollar positions for now. With markets cautious, narrow ranges are likely to prevail with positions also cut quickly. The dollar should be able to secure immediate support at 1.2120, but long dollar positions offer little immediate value stronger than 1.2050.
After the gains to near 1.20 in New York trading on Friday, the dollar made a brief attempt to strengthen through 1.20 on Monday, but it was unable to sustain the move and it weakened back to 1.2075 in early Europe on Tuesday. The employment report will be very important as it will tend to set the tone for the next 2-3 months.
The data before then will be significant, starting with the Chicago PMI and consumer confidence data today. The ISM manufacturing report will also be significant tomorrow. The dollar should be able to survive a minor downturn in the indices, but a sharp slowdown would be damaging and increase the pressure for a firm payroll report.
There will be security concerns during the US Republican convention and this will tend to deter long dollar positions for now. If there are no incidents by Thursday there may be a greater willingness to buy the dollar.
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