The Euro and dollar continues to reflect on their own weaknesses for the short term. At this time there are signals for possible short-term range currency trading as marketplaces will be very cautious about fundamentals in both currencies. Provided the overall worldwide risk profile, the net effect is at some point likely to be a firmer dollar, although the US currency can still fight to gain strong support except if there exists a key deterioration within the European banking marketplace.
The Euro hit resistance near 1.4280 up against the dollar on Wednesday and weakened to test support within the 1.42 region, although resisted even more losses as risk appetite had been stronger and consolidated around 1.4250 soon after failing to break across the 1.43 location again. There will obviously be consistent anxieties over the Greek debt predicament plus the broader unfavorable effect on the financial field.
Additionally there is apt to be a delay ahead of further policy action is taken which could also be possibly detrimental to sentiment as sovereign-debt fearfulness continue. The Euro may nevertheless gain certain support on yield grounds with ECB authorities still taking a firm tone. Fundamental confidence in the US economy and currency will continue to be weakened, although the end of quantitative easing in June ought to help stem selling pressure.
Risk conditions are apt to be commonly less favorable that will provide some defensive dollar assistance. In general, the Euro most probably will stall close to 1.43 and a move to the 1.40 region continues to be realistic, nevertheless the dollar will find it quite hard to break Euro support in this area.
The dollar located support underneath 81 against the yen during Wednesday and recovered to a high in the vicinity of 81.50 in US forex trading on anticipation of further merger-related flows out from Japan. Overall confidence in the Japanese overall economy signals to remain very poor and the Bank of Japan should retain a very expansionary policy to support the economy following the GDP contraction and downward modification to industrial production.
The buck pushed to a high around 81.75 on Thursday, however momentum in the meantime is likely to stall within the 82.0 area. Buying US retreats towards the 81 area signals to be the best approach.
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