Underlying support for the dollar is likely to be weaker on yield grounds with further concerns that the US economy will face a second-half deterioration. Global growth considerations will also be important and a reduction in confidence will lead to some defensive dollar support. Any increase in financial-sector stresses could lead to strong dollar demand as credit fears escalate. Euro fears are liable to increase given the financial-sector risk. Given the net global risks, the Euro is liable to drift weaker and there is further value in selling EUR/USD above 1.2350.
The dollar lost some further ground against the Euro in Asia on Thursday, but with the Euro still finding it difficult to break above 1.2350 as resistance levels remained intact.
There was a renewed widening in Greek credit default swaps during the European session which unsettled the Euro and it declined to lows near 1.2250. Short-term players were unable to break Euro technical support levels which helped trigger a rebound in the currency.
The US economic data was close to expectations and had a limited market impact. Headline durable goods orders fell 1.1% while there was a 0.9% underlying monthly increase. The jobless claims data recorded a decline to 457,000 from a revised 476,000 previously. There will still be unease over fragility within the labour market while there will also be persistent doubts over the housing sector which will curb dollar support.
Dollar yield support remained weaker following Wednesday's Federal Reserve statement with 10-year Treasury yields at an 8-month low which will tend to sap dollar support. In this environment, the dollar drifted lower and the Euro pushed higher to a peak near 1.2390 during the US session. The Euro retreated back to the 1.2330 area as Wall Street weakened for the fourth consecutive session.