NEWS / Foreign Exchange

Dollar Direction Unsure, Ahead of Data??¦

What a dayyesterday, with all currencies in a correcting mode for most of the day. Dollargot sold off all across the board, with EUR/USD renouncing slowly, from 1.4170up to 1.4285. The most impressive move though was made by the pound which itout staged any other daily performance. The pair got bid fast and retraced thewhole move, making daily highs at 2.0517.

            What a crazy week this has been sofar! Monday we saw an aggressive fall in all yen related pairs and alsostrengthening of the dollar, and then Tuesday we saw almost the whole movereversing for no apparent reason. The lack of economic data in combination withthe rally in equities and stocks, made investors wary of which direction totake and so all we saw was rollercoaster moves.

            Today, although we don??™t have manyreleases, the only one in all traders??™ minds is the Existing home sales. Withall housing data being really poor last week, investors are nervous when itcomes to new economic data, as the risk to the downside is more real now, thanever.

            As the time for another FED meetingapproaches, traders start to wonder what the next move by Bernanke will be.Most analysts predict that due to negative data all month and further slowingin the housing sector, the bank will cut rates again, as early as next week.Although rhetoric from FED members has been neutral to hawkish when it comes toinflation, one wonders how long it will be till we have another financialcrisis. The Bank will have a difficult task once again, trying to calminvestors as the problems from the credit crunch are still visible and therecent data show that there is more to come.

            EUR/USD found good support at 1.4130and since it touched that level, it hasn??™t looked back. With the trend in thepair still up, and many traders wishing to buy euro at low levels, there ispossibility for another wave of bids, to take the pair back at double top1.4350. Mondays move though, gave a small fright to euro bulls, as the risk ofdollar being bid as a safe haven currency is always there. Let??™s not forget,that if there are problems in the global economy, other countries can be hitharder than Americaand therefore it??™s safer to put your money in dollars rather than some othercurrency.

            It will be interesting to see howthe cable performs today, as at the time of writing is near 2.0500 and if itcontinues the upward move, we might see next level of resistance at 2.0550. Itmight be a good level for shorts there, with more at 2.0585 and stops above2.0610.

Let??™s seehow the market reacts to the data and how they will play the FOMC meeting, fromnow till the 31st of October??¦