4 October 2002, 12:21  European Forex Trading Preview

The dollar rose in Tokyo trade but was restrained by familiar resistance areas against the majors. EUR/USD held above 98.60 support, while USD/JPY was unable to break back through the key 123 level. A roller coaster ride on Wall Street Thursday added to the sense of uncertainty in the FX market as traders look to see if a near term bottom can be found in the global equity market. Dealers fear further declines will increase investors' risk aversion and eventually weigh on the dollar. But capital flows to the US continue to give comfort to the greenback.
Overnight, the dollar rose in tandem with stocks following the better than expected non-manufacturing ISM index and factory orders data, but the greenback shed most of its gains as Wall Street relapsed into negative territory. Technically, the Dow stopped right at the 62% retracement from this week's high, indicating further lows are likely to be seen into next week. Given that the dollar has gone tick for tick lately with Wall Street, this should weigh on the currency.
US non-farm payrolls are expected to rise a mere 5k in September, down from 39k in August and low enough to drive the unemployment rate back to 5.9% from 5.7%. A negative number could easily push stocks and the dollar lower, but a better than expected figure could bring some relief to Wall Street.
EUR/USD fell back from a one-month high of 99.06 in NY, just pips above above last week's high of 98.95. The euro slipped sharply to 98.55 after the positive US services data but remained above key support at 98.40, and important T/L resistance at 98.60. Below 98.60 targets 98.40 and 98.00. Moreover, the euro needs to break back above 99.05, the 50% retracement of the decline from 1.02 high to the 96.10 low, to escape its 96-99 trading range. Above here would be a strong signal for euro bulls who have seen the pair trade in this region for many weeks.
European services data today is seen falling to 50.5 in September from 50.8. The main drag is again Germany, which is seen falling further into contraction at 47.4 in September from 47.7. The Eurozone composite index is also expected to fall to 51.1 from 51.5. A fall in E-12 services sector would stand in sharp contrast to that of the US, which rose to 53.9 from 50.9 in August, indicating the services sector continues to expand despite heightening concerns of slowing economic growth. UK services also expanded to 55.5 in September from 55.1, above forecasts for a fall. The gain points to a firm service sector and confidence in the economy with the domestic economy holding strong.//www.forexnews.com

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