4 September 2002, 12:16  European Forex Trading Preview

The dollar remains weak across the board as investors retreat from risk seeking behavior and move money into safe haven currencies like the Swiss franc. A sharp drop on Wall Street has the market buzzing about another retrenchment in business spending and possibly consumer demand. Therefore, given that the dollar's fate remains tied to hope of an impending economic rebound, disappointment will continue to drive it down over the near term.
EUR/USD is hovering around 99.55 and only a fall below trendline support at 98.40 would jeopardize a run at parity and its July high of 1.02. Interim support lies at 99.10 and 98.75. Key resistance is seen at 99.80, the 62% retracement of 1.02-96.21.Key PMI services data from the Eurozone and UK will give direction to traders today, as well as preliminary French GDP for Q2, which is expected to rise 0.6% from 0.4% in Q1.. E12 services production is expected to ease slightly to 52.2 in August from 52.6, while UK services is seen at 54.6 from 54.7. While both are expected to remain well above the 50 mark, an unexpected fall could easily take away gains from the recent run up in EUR/USD and GBP/USD.
Cable held near 1.5657, a one-month peak. Sterling had received fresh momentum on Monday from a better than expected PMI reading of 51.0, the highest level in three months. Further gains are seen capped at 1.5730/40, a daily high from July and August. A break above 1.5866, cable's 26-month high reached in July 26th, could signal a resumption of a bullish trend for the pound. Meanwhile, support is seen at 1.5615, 1.5595 and 1.55.
Tokyo's Nikkei fell for a seventh consecutive session, ending down 1.5% at a new 18-year low of 9,075. While the news is very troublesome to government officials and investors, traders were reluctant to sell yen because of repatriation fears. Moreover, Japanese repatriation of foreign-based assets becomes especially prominent when weak economic performance at home is exasperated by the deteriorating values of stocks. Since attaining their July trough, the broad US and European stock indices rose 16% and 10% respectively. Therefore, selling of foreign assets could exacerbate the downward trend in USD/JPY as US markets fall and Japanese repatriate.
USD/JPY recovered from a sharp fall on Tuesday to a session high of 117.45, but remains below key support at 117.75, the 61.8% retracement of the rise from the 115.55 low to the 121.32 high. Failure to regain this level risks a further selloff targeting 117.00 support ahead of the 115.55 lows. Resistance still seen at 117.70 ahead of 119.00 and 119.50. //www.forexnews.co

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