Greenback trades lower as fears of higher trade deficit resurface

The trade deficit improved in December, but the U.S. consumer's appetite for imported goods led to another record trade gap in 2004.
The U.S. trade deficit narrowed by 4.9 percent to $56.4 billion. The narrowing of the trade deficit was slight higher then the market consensus figure of $ 52 billion. The dollar reversed its pre -trade data gain as fears of the burgeoning trade deficit resurfaced.
The Euro broke past the resistance of 1.2840 to hit the 1.29 mark in the late US trading session . Currency should see stiff resistance at the 1.2930 levels. A break above these levels should see the currency testing the 1.3150 levels. The bullish breakout in the Euro booted sentiment for other European currencies especially the Sterling which broke past the 1.8640 levels to test the resistance level of 1.87.
The markets should be eagerly awaiting the capital flow data,as question of the deficit funding remain a question mark..
Traders advised to go dollar long at lower levels as the underlying sentiment for the currency continues to remain bullish.

Consolidation ahead of trade data

There was a relative vacuum in the Fx markets after last week’s key events got by, so market looks forward to numbers and developments, especially the trade deficit data from the US from here on.

The US dollar is trading slightly weaker against major currencies in a thin Asian trading session as most Asian markets are closed for the Lunar New Year break. Dollar traders heard comments from Atlanta Fed President Jack Guynn on a possible shift in Fed’s policy statement wordings from “measured” / “accommodative” pace, used so often in the past to interpret it as a slowdown in rate hikes.
Earlier, Cable was given a breather and reached the peaks of $1.8650 after an unanticipated narrowing of the UK trade deficit to 4.43 billion GBP (forecasts: 4.8 billion), a rise in manufacturing by 0.6% m/m and 1.1% y/y compared to predictions of 0.3% and 0.1% respectively and by a likely upgrade of UK Q4 GDP estimate by 0.1%.
Pitted against the yen, greenback eyes 106 as the next target breach of which may lead to triggering of some stop-loss orders.
Dollar has not been able to cash in further on its multi-month peaks against the majors and a wider than expected trade balance figures (forecast $57 billion) may catch the markets off-guard. Any level lower than $55 billion will be positive for the greenback.

Forex crosses spared by lack of data releases

The European currencies held on their previous cross in the absence of any major market-moving event.
The dollar continues to trade steady as the market remained devoid of any major economic data release.
The Euro remained confined to a day of range bound trading around the 1.2760 levels, coming off an intraday high if 1.2799.
Sterling too was unamused by the lack of show of data, trading around the 1.8535 levels, after testing the 1.8515 support.
The Japanese currency came under pressure amid decreased market expectations, paring the currency lower across the board. Now that the Yen had breached past the 105.50 mark against the dollar, it settled to trade around 105.75 levels, only after testing the 106 levels.
The dollar lost out against the candy, as the pair broke through the 9-month trend line, to trade at 1.2480 levels.
Looking ahead the markets are expected to focus on Germanys Current account balance and the jobless number as well as the December trade figures from the US.

Dollar maintains buoyant tone

The dollar extended its rally against the major currencies touching fresh 3-month highs against the euro.
The dollar was aided by fed chairman Alan Greenspan’s weekend comments and President Bush’s Budget speech. The White House proposed to reduce the deficit to $390 bn from the projected $427 deficit for 2005. The easing deficit concerns and the Fed's resolve to raise interest rates as the US economy expands meant that the dollar continued on its positive path. The dollar surged to a high of 1.2733, before settling to resume trading around 1.2760 levels.
Cable broke through the trend line moving lower to trade at 1.8560.
The Yen was taken aback by further rhetoric from Chinese officials playing down the revaluation of the Yuan. The dollar yen pair edged towards the 105 resistance, with further resistance eyed at 105.5.
With renewed strength in the dollar and optimistic view from the fed chairman would translate to more buyers for the dollar.
Markets will await the US trade balance and Current account balance from Germany for a further cue to currency movements.

Dollar bulls come charging back as Greenspan gives a positive boost

The dollar made a spectacular recovery on Friday as the market cheered the Fed Chairman’s positive sentiment over the US current account deficit despite a weaker than expected payrolls number and Michigan consumer sentiment figures.
The opening of the US session saw the dollar tumble by around a cent against the euro as the single currency was bought on a softer than expected payrolls at 1, 46,000 and a downward revision in the same figure for the previous three months. Further accelerating the dollar fall was the Michigan consumer sentiment, which also came lower at 95.5 against the expected 97.1. But soon after these releases Greenspan’s speech reflecting the incumbent administration’s resolve to reduce the deficit and his own long term view on a falling deficit helped the US currency which made a sharp U-turn gaining finally more than a cent and a half to close the week at $1.2870- finally breaching the $1.2930 support level.
Yen’s losses were not as sizeable as its European counterpart as it fell from a low of 104.50 to 104 as the traders awaited the final word from the weekend’s G7 meet where it is now expected-with the absence of Mr. Snow and China’s refusal to accede to the floating its currency- that the FX issues will take a back seat.