Mixed trading in Dollar; marginally up against Euro

Dollar recovered slightly against the euro on Friday, but remained vulnerable against the major currencies.



The greenback had fell sharply on Thursday, as the expectation of investors for further interest rate cuts in the US was boosted by remarks from the Chairman of US Federal Reserve Mr. Ben Bernanke.



Meanwhile, the US trade deficit shot up unexpectedly in November. According to the Commerce Department release on Friday, the US trade gap in November increased by $5.4 billion or 9.3 percent, to $63.1 billion.



The Fed chairman had signalled on Thursday the willingness of the central bank to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks, taking into consideration the increasingly gloomy economic data.



The European Central Bank held rates steady at 4% for the seventh month in a row. The Bank of England also decided to hold its key interest rate unchanged at 5.5%.



Recent data from different sectors indicated weakness in the US economy.



According to the release by US Labor Department on Thursday, the four-week average of continuing claims increased 17,000 to 2.7 million, the highest level since Nov 2005. But first-time claims for state unemployment benefits fell 15,000 to 322,000 during the week ending Jan 5; while continuing claims fell 52,000 to 2.7 million.



The National Association of Realtors’ pending home sales index fell 2.6 percent in November. Economists’ consensus expectation was for a drop of 0.7 percent.

The unemployment rate in US shot up to 5% in December, from 4.7% according to the Labor Department.

Medium Term Outlook

Active trading above 1.4510 is the sign of weakness in dollar. Supports are 1.4630, 1.4755, 1.4788, 1.4966 and 1.5052. Resistances are 1.4450, 1.4320 and 1.4277. More weakness can be expected above 1.4968

In spot trading, dollar closed at 1.4766 (1.4805) against the euro, after trading in the range 1.4760 – 1.4819.

Last day, DEUR March traded in the range 148.12 – 147.60 and closed at 147.81.

Intra-day trading ranges; supports are 146.70, 145.90. Resistances are 148.40, 149.07.