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Euro consolidating gains - may retrace

Forex618.net Daily Currency report for Wednesday August 2 2006

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This Week's Economic Calendar
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Date ET Release For Actual Briefing.com Consensus Prior Revised From
Jul 31 10:00 Chicago PMI Jul 56.0 56.0 56.5
Aug 01 00:00 Auto Sales Jul 5.5M 5.5M 5.3M
Aug 01 00:00 Truck Sales Jul 7.7M 7.5M 7.2M
Aug 01 08:30 Personal Income Jun 0.6% 0.7% 0.4%
Aug 01 08:30 Personal Spending Jun 0.4% 0.4% 0.4%
Aug 01 10:00 Construction Spending Jun 0.2% 0.3% -0.4%
Aug 01 10:00 ISM Index Jul 54.0 53.5 53.8
Aug 02 10:30 Crude Inventories 07/28 NA NA NA
Aug 03 08:30 Initial Claims 07/29 310K NA 298K
Aug 03 10:00 Factory Orders Jun 1.6% 1.1% 0.7%
Aug 03 10:00 ISM Services Jul 58.0 56.5 57.0
Aug 04 08:30 Average Workweek Jul 33.9 33.9 33.9
Aug 04 08:30 Hourly Earnings Jul 0.3% 0.3% 0.5%
Aug 04 08:30 Nonfarm Payrolls Jul 135K 145K 121K
Aug 04 08:30 Unemployment Rate Jul 4.6% 4.6% 4.6%

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EUR/USD

Medium Term Trend: A little more action yesterday as the euro pushed out of the tiny daily range and up towards 1.2850 as expected. As 1.2850 is the top of the bigger 2 month range, we shall have to allow for a rejection from here, with many stops probably situated just above. We must remember that we have been in a largely sideways market since May this year, with the range roughly between 1.2500 and 1.3000. Until we close outside this range on a weekly basis, we shall have to allow for much more work inside this range, making picking levels difficult in choppy thin conditions. Dips should still be limited to 1.2700/1.2650, and until we break above 1.2850, try small shorts near there, re-buying on dips again later. A break above 1.2880 will see the euro back at 1.2950 in very short order, so keep stops disciplined.

Strategy today: Play the range - Sell rallies to 1.2830, stops above 1.2880. Buy on dips to 1.2700/1.2650.

Chart: We have rallied to the range top and we might well see a slump back towards the centre again, as the euro may not be quite ready to take on this new challenge.