Dollar weakens against euro

The dollar weakened against the Euro on Friday on renewed concerns about the economy after the release of weaker than expected consumer confidence. According to the report, U.S. consumer confidence dropped to its lowest in 26 years.

The Reuters/University of Michigan Surveys of Consumers said its preliminary index of confidence fell to 63.2 in April from 69.5 in March. This was well below economists' median expectation of a reading of 69.0, according to a Reuters poll.

But dollar had shown some recovery against the euro after the comments form ECB chief on Thursday. Dollar recovered from record lows against the euro as European Central Bank President Jean-Claude Trichet expressed concerns over high inflation, sluggish growth and foreign-exchange volatility.

Most of the data’s are supporting the view of weak economy in US. The US Commerce Department revealed the nation's trade deficit expanded unexpectedly by 5.7% to $62.3 billion in February.

In job sector, Initial jobless claims in the US fell 53,000 to 357,000 in the week ended April 5, as reported by the Labor Department. But the four-week average of initial claims rose by 2,500 to 378,250.

Also, continuing jobless claims rose 3,000 to 2.94 million, the highest since July 2004, for the week ending March 29. The four-week moving average of continuing jobless claims increased 36,500 to 2.9 million.

According to a Commerce Department report released on Wednesday, US wholesale inventories increased a more-than-expected 1.1 percent February, while sales fell 0.8 percent.

The National Association of Realtors’ (NAR) pending home sales index for February fell 1.9 percent to 84.6 from 86.2 in the previous month.

Minutes from the Federal Open Market Committee meeting held in March gave a downbeat assessment of the US economy, leaving the possibility of further cuts in US interest rates intact. The minutes also showed that many board members believed a recession in the first half of 2008 was likely amid declining economic growth and financial market stress.

According to the release from US Labor Department last week, non-farm payrolls fell by an estimated 80,000 in March.

Also, the unemployment rate in the US rose to 5.1% in March, the highest since September 2005.

Federal Reserve Chairman Ben Bernanke, in testimony to Congress, had said that the outlook for US economic growth had worsened since January and the possibility of a recession could not be ruled out.

Medium Term Outlook
Expecting a short-term recovery in dollar if it sustains below 1.5725; Supports are 1.5909, 1.6148, 1.6420. Resistances are 1.555, 1.5380, 1.5220 and 1.5110. But if it trades above 1.5910, more weakness can be expected.
In spot, dollar closed at 1.5802 (1.5742) against the euro, after trading in the range 1.5855– 1.5735.
Last day, DEUR June traded in the range 157.11– 158.00 and closed at 157.85.