-
Dollar looks for growth evidence
The Euro will continue to be shaken by the sharp losses last week and this will inevitably deter Euro buying with near-term resistance around 1.22. The US dollar will, however, now need to see underlying buying interest to rally further and this will be a difficult proposition with medium-term depreciation still likely. Overall long dollar positions offer very little value stronger than 1.2080 against the Euro. The US currency will still find it difficult to secure strong underlying buying interest, especially given the dollar's underlying vulnerabilities. The forthcoming US data will be important given Greenspan's bullish stance on the economy. The consumer confidence figures on Tuesday and durable goods figure on Wednesday may be treated as more important than usual or is justified given the anxiety over near-term US growth trends. Wall Street will be an important short-term focus with the Dow Joes index weakening to below the 10,000 level on Friday, while the Nasdaq fell to a new low for 2004. Persistent weakness could trigger a repatriation of funds back to the US which could offer the dollar some near-term support, but the medium-term implications of a further Wall Street decline would be clearly dollar negative. The latest IMM data recorded an increase in long Euro positions to a record level above 36,000. The Euro was, therefore, vulnerable to sharp correction. The next set of figures will be very important to see how many of these positions were liquidated last week. If there are still a large number of long Euro positions, the Euro will find to difficult to regain ground. Analysis supplied by