Rising Stocks and Housing Data Hurt the Dollar

05.05.2009 (09:02)

The Dollar continued its upward correction as a rise in stock markets and better than anticipated economic data fueled further risk-taking in the forex market. The EUR/USD was under pressure during trading hours in Japan and Europe, falling throughout the day. However, the pair failed to break a key support line at 1.3200 and reversed course. Driving this appreciation of the pair were gains in equity markets. The Dow Jones Industrial Average finished the day up 2.61%. Adding further to risk appetite in the market was the release of better U.S. Pending Home Sales data. The release came in surprisingly high, contributing to the sell-off of the Dollar.

Prices could have been exaggerated earlier in the day as liquidity was light due to Japanese markets being closed for "Golden Week". We may expect further weakness in the Dollar's crosses as expectations abound to the easing of the global economic recession. This may be seen extensively against currencies linked to commodity prices such as the Aussie Dollar (AUD) and New Zealand Dollar (NZD).

Two major events are on tap for today's trading. The Institute for Supply Management (ISM) will release its Non-Manufacturing PMI report. This indicator is a key gauge of economic activity and expansion. The reading is expected to show moderate improvement from the previous month's release. A second event will be testimony from Federal Reserve Chairman Ben Bernanke on the economic outlook before the Joint Economic Committee of Congress. His comments may hint at an improving economic environment, which may in turn hurt the Dollar. We could see the EUR/USD test the 1.3600 resistance line today.

	Symbol	Bid	Ask
	EURUSD	1.31152	1.31159
	USDJPY	76.764	76.772
	GBPUSD	1.58102	1.58116
	USDCHF	0.92024	0.92036
	EURCHF	1.2068	1.2072
	GBPCHF	1.4547	1.4553
	AUDUSD	1.0773	1.0778
	USDCAD	0.9979	0.9981
	GOLD	1714.60	1715.60
2012.02.07 11:45:24 (GMT)