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Afternoon rallies in US stocks are becoming in-vogue as the major indices make a late session +1% rallies. But the dollar failed to hold on to earlier stocks-driven gains, drifting back towards the session lows against the 4 major currencies. The reiteration for the strong dollar policy by none other than president Bush's influential economic adviser Larry Lindsay gave the greenback some vigor that was already in early retained after an investment bank upgraded a number of semiconductor stocks.

EURUSD made an impressive full cent rebound even though it failed to regain the 99-cent footing. Euro bulls were energized by the latest balance of payments numbers from the Eurozone showing portfolio investment to have grown to a net 11.5 bln euros from 8.1 bln euros, while net direct investment rose to an inflow of 7.7 bln euros from a 5.7bln euro outflow in March. The data lent further support to the notion that the tide of capital outflows from the region has begun to ebb, which is an instrumental factor to the currency's long-term viability.
EUR/USD faces resistance at the 99-cent level followed by 99.25.30 and 99.55-60. Long-term resistance seen at $1.2. Support starts at 98.35-40 followed by 98. Subsequent support seen at 97.70, the 68% retracement of the move from 96.60 to 99.45.
Sterling had more success in nearing its 2-year high against the dollar, but ended up being subjected to some selling pressure around the 1.5280s as US stocks attempted to managed to sustain their hold in positive territory. A retest of the high should face preliminary pressure at 1.53 with follow-up resistance at 1.5325-30. Support starts at 1.5240 backed by 1.5175-80, the 38% retracement of this week's rise (from 1.4960 to 1.5315) rally. Follow up support is seen at 1.5145/50 and 1.5110/00.
Markets will await tomorrow's revision of UK Q1GDP figures, in which sterling bulls wish to see an upward revision to 0.1% from 0% or the UK will have a two straight quarters of flat growth.
Long-term analysis (weekly chart) in USDCHF suggests the pair to be nearing the key major support of 1.4708, which is the 50% retracement of the downmove from the 1.128 (1995 low) to 1.8307 (Oct 2000 high). But on the short-term, the pair has first to retest today's low of 1.4858, which is the 61.8% retracement of the rise from the 1.2747 low (Oct 98) to the 1.8307 high (Oct 2000). A breach below this would call up the aforementioned 1.4708. Upside seen limited at 1.4920 followed by 1.5.
After a brief foray atop the 120 level, USD/JPY pared all of its morning losses to fond its way through the 119.40s. The pair paid no regard to uninspiring round of remarks by Japanese finance officials stressing on the importance of stable currency movements. USD/JPY now draws support at 119.25-30 backed by key support at 118.85--61.8% fibonacci retracement of the rise from the 101.24 low (Nov 1999) thru the 147.62 high (Aug 1998). Resistance seen at 119.75-80 followed by 120.20 and 120.55-60.
US stocked displayed their usually late session strength led by NASDAQ's 29 pts rally at 1459. Dow finished 149 pts higher at 9269 while S&P500 gained 17 pts to finish at 990.
Tomorrow's key data will be the final revision of UK Q1 GDP expected to be revised up to 0.1% from 0%. In the US, markets will watch for the Chicago PMI survey on manufacturing expected to drop to 57 in June from 60.8 in May, followed by the final June release of consumer confidence seen declining to 90 from 96.9.