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Return to range trading?
The Euro retreat back through important support at the 1.2350 level will undermine near-term Euro sentiment and there will also be fears that narrow ranges will again prevail in the short term. Greenspan is likely to be generally optimistic today, but the dollar will still find it difficult to secure strong buying interest. Overall, the Euro needs to push back above 1.2350 to regain momentum, but the dollar offers little immediate value stronger than 1.2250. The Euro lost support at the 1.2350 level during Monday as short dollar positions were closed. The Euro weakened to a low of 1.2260 before a slight recovery to 1.2275 in early Europe on Tuesday. There are still uncertainties over the US economy and markets will be looking for guidance from Fed Chairman Greenspan today. Greenspan is likely to remain generally optimistic and is also likely to suggest a further interest rate hike in November. This stance would offer support to the US currency, although heavy buying is unlikely. The Euros inability to sustain a break higher, coupled with very tough resistance above 1.24 will reinforce speculation that narrow ranges will prevail again. The markets may try to push the dollar stronger and trigger further Euro selling, but it will still be difficult to see substantial dollar gains given the doubts over longer-term trends. The Euro-zone data remained weak with the PMI index for the services sector weakening to 53.3 in September from 54.5 the previous month. Analysis supplied by