The dollar was unable to break Euro support in the 1.40 area on Wednesday and had a generally weaker tone during the day. The Euro gained some initial support from a slightly stronger than expected German retail sales report while global risk appetite was also generally firmer.
The US economic data was mixed and did not have a decisive impact on trading. The ISM index for the manufacturing sector rose to 44.8 in June from 42.8 the previous month which was marginally above expectations, although there was some disappointment that the orders index slipped back to below the 50.0 level which suggested an important risk that any recovery in the industrial sector will stall relatively quickly.
The ADP report recorded a private-sector employment decline of 473,000 for June after a revised 485,000 drop the previous month. Elsewhere, there was a marginal increase in pending home sales while construction spending edged lower for the month.
The dollar weakened sharply in US trading following a report that the Chinese authorities had called for the issue of global reserve policies and the introduction of a new reserve currency to be discussed at the G8 meetings next week. The Euro strengthened to a high at the 1.42 level before consolidation around 1.4150.
There will be the risk of high volatility on Thursday with the US employment release and the latest ECB policy decision. The Euro will be vulnerable to selling pressure if the ECB announces any additional quantitative easing measures.
Source: VantagePoint Intermarket Analysis Software
By: Darrell Jobman
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