Monday September 27, 2004 - 09:56:38 GMT
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INVESTICA Ltd - www.investica.co.uk
Forex: US growth doubts persist
The dollar will be hampered by the doubts over US growth trends while the low level of US Treasury yields will encourage a further shift into higher-yield currencies. The 1.2350 region remains important for medium-term trends. There are likely to be fresh buying attempts to trigger a Euro break above this level, but the Euro offers little immediate value above 1.2350 given the high number of speculative positions.
The Euro briefly strengthened to the 1.2350 level against the dollar, but the Euro was unable to sustain the position and it weakened back to 1.2270 in New York on Friday with little change in early Europe on Monday.
The markets are doubtful whether the Fed's optimistic stance on the economy is justified and will want strong data over the next few weeks. There is, however, a lack of near-term data incentives which will make a decisive trend difficult. Oil prices will remain an important near-term focus and the implications of prices close to the US$50 p/b level are likely to be slightly negative for the US currency on fears that the economy will slow.
The latest IMM data recorded a small decline in long Euro positions of 400 in the latest week, but the net long position is still above 25,000. This will make it more difficult for the Euro to make ground. The German IFO index weakened marginally to 95.2 in September from 95.3 in August, but markets had expected a slightly worse number.
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