NEWS / Foreign Exchange

More Dollar Declines Seen Ahead

Dollar moderates its declines against most FX expect the yen, which is losing across the board on a temporary surge of risk appetite, reflected in performing world bourses. Germany ??™s IFO business survey exceeded expectations in each of its three component indices in March, nearing the 16-year highs reached in December and proving that domestic demand has overwhelmed any impact from this year??™s VAT tax hike to 19% from 16%. US data will start off with more on housing at 9 am EST with the S&P/Case Shiller monthly Home Price Indices. The Composite 10 index fell 0.2%, 0.2%, 0.4% and 0.8% in Sep, Oct, Nov and Dec respectively, reaching 222 in Dec from 225.1 in Sep. The Composite 20 index also fell in each of the last 4 months, reaching 203.1 in Dec.

The day??™s flagship indicator shall be the 10 am key release on US consumer confidence from the conference board could very well add to the ensuing bearishness in the US dollar and equities via a worse than expected headline number. Consensus forecasts are already expecting a drop to 108.5 in March from 112.5 in February due to rising gasoline prices, falling home prices and persistent uncertainty from the sub-prime fallout on general stock indices. A private index on Investor Optimism by UBS fell 12 points to 78 in March, reaching its worst level in six months due to expectations of falling stock prices rising gasoline prices. 72% of investors said they believe the national real estate market is getting worse (up from 63% in February), with only 21% believing it is getting better (down from 30%).

Revisiting the dollar??™s head and shoulder formation

You do not have to be an expert on technical analysis to know that a price chart showing the shape of a head-and-shoulder formation (H&S) is a classic bearish pattern. You may recall that last Wednesday (the morning of the FOMC meeting) we alerted readers that the US dollar index daily chart ending on Tuesday evening showed an H&S pattern, which predicted a dollar drop by end of FOMC Wednesday. Indeed, the dollar index tumbled that day from 83.2 to 82.7 as a result of the dollar??™s tumble to 2-year lows against the euro at 1.3410 and USDJPY to 117.20. Today, the head and shoulder formation is back in play, sending a more resounding signal after the repetitive failure to break above the neckline resistance.

EURUSD eyes 1.34, spurred by both sides of the coin

US data seen capping USDJPY

Sterling drops on dovish MPC

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