Thursday September 23, 2004 - 20:36:53 GMT
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Dollar Shows Its True Grit
The dollar showed resilience today in the face of more mediocre numbers and a bid euro but in the late afternoon came thru to see the light as it pulled out of the doldrums once again. There was some good news for the dollar after the FOMC minutes was released late in the afternoon and followed by hawkish comments. The dollar bounced off 1.2550 support a few times today and this level is now seen as very good technically for the dollar. The FOMC meeting acknowledged economic growth softened somewhat in recent months; but much of the text remains optimistic about the overall economic outlook. All the members favored an increase in the target for the federal funds rate from 1¼ to 1½ percent. Although the pace of the economic growth was moderate in the second quarter, the committee believed that the softness would be short lived and that the economy was poised to resume a stronger rate of expansion going forward. Crude oil prices was seen on the rise again this afternoon and this led to the strengthening in yen as we saw prices reach almost $50 a barrel at 49. The dollar against the yen was at 110.92 over night and the cross hit new highs as well near 136.55. The euro was once again trapped in a range of 1.2335-1.2255 as option related selling continues to dominate the price action in front of 1.2350 and 1.2400. BIS was also said to have been a major seller along with Asian interests in front of 1.2350 today and finally in the afternoon we saw a splash to the downside hitting fresh NY lows to 1.2255, there is heavy stops now in the market at 1.2250 and if taken out 1.2220 again comes into picture. These options roll off tomorrow and with that we can finally see the euro post new highs.
Technically Speaking: With 1.2550 and 1.2520 now as nice support technically for the dollar we can see the dollar pop towards 1.2750 and higher as the week comes to an end.
Gain an Edge: We look to buy dollars on the dip towards 1.2550 with a stop in place at 1.2510, our objective will be 1.2800.
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