NEWS / Foreign Exchange

Dollar Stabilizes, GDP Seen Threatening Further Selloff

Euro to stabilize at 1.3570 ahead of Friday??™s US GDP

Euro extends its retreat below 1.36 towards the 1.3590s as the temporary data vacuum from the US permits traders to drag the pair for renewed rallies.

Germany??™s GfK consumer confidence rose to an all time high of 5.5 in May from April??™s 4.4, while French manufacturing sentiment for April rose to 2 points to a 6-year high at 111. Germany??™s largest trade union IG Metall has stepped up its threat, warning that a strike may start as early as April 30 th after employers refused to improve on their to of 2.5% pay hike plus a bonus against IG Metall??™s demands of 6.5% increase. In the past, demands of 4.5% hikes were met with offers of as much as 4.0%. But with the ECB expected to raise rates to least 4.25% this year, inflation is expected to remain within 2.0-2.1%.

The single currency continues to be boosted by a consistent dosage of strong data and approving remarks from European officials vis-a-vis the currency??™s appreciation. As long as these conditions remain in place and US data reports continue sending conclusive evidence of slowing growth, the euro??™s route towards the 1.37 figure shall remain unhinged.

With the trend line support since April 9 being broken, next support stands at 1.3577, followed by 1.3545 as the 4-hour chart suggests further short-term declines. Upside capped at 1.3610, followed by 1.3635. Support should also be intact ahead of Friday??™s US Q1 GDP release is expected to come in at 1.8%, matching the low of Q4 2005. This would be the longest streak of sub-3.0% GDO growth since the 2002. .

USDJPY boosted by diversification remarks, capped at 119.50

USDCAD eyes 1.1240 ahead of BoC report

Sterling eyes 1.9870