Dollar strengthened against the euro yesterday as traders took profits on the European currency amid optimism that the Federal Reserve's

Dollar strengthened against the euro yesterday as traders took profits on the European currency amid optimism that the Federal Reserve's cycle of cutting interest rates might be done and expectation of recovery in economy in light of series of rate cut.

The Fed on Wednesday cut its overnight lending rate by 25 basis points to 2 percent and signaled that its next move would depend on developments in financial markets and the economy. The Feds signal boosted the optimism of the traders in the currency market. Since mid Septspanber the U.S. central bank has slashed the fed funds rate target by 3.25 percentage points to shore up an economy.

Slightly spaner than expected U.S. manufacturing and consumer spending data released yesterday also supported the span recovery in the green back .A report showing a slightly higher than forecast reading of the Fed's preferred inflation gauge also helped the sentiments of the investors .

But in the last week in a separate release the US Commerce Department revealed the nation's trade deficit expanded unexpectedly by 5.7% to $62.3 billion in February.

As expected the European Central Bank had left the interest rates unchanged while the Bank of England cut its benchmark interest rate by 25 basis points to 5 percent.

Medium Term Outlook

Expecting a short term recovery in dollar if it sustains below 1.5725 Supports are 1.5909 1.6148 and 1.6420. Resistances are 1.555 1.5380 1.5220 and 1.5110.

In spot dollar closed at 1.5469 (1.5616) against the euro after trading in the range 1.5643 1.5428.

Last day DEUR June traded in the range 156.08 154.04 and closed at 154.25.

Spot Dollar vs Euro



TECHNICAL OUTLOOK (Intra day)


DEUR (June) Bullish above 154.92 bearish below 154.47

COMMODITY

CL.RATE

SUP .2

SUP.1

RES 1

RES 2

DEUR (June)

154.25

153.30

153.98

155.39

156.07



DATA TO WATCH

2008 may 2

Date

GMT

Forecast

Previous

Fri

May 2

12:30

Nonfarm Employment Change

80K

80K

12:30

Unspanployment Rate

5.2%

5.1%

12:30

Average Hourly Earnings m/m

0.3%

0.3%

14:00

Factory Orders m/m

0.2%

1.3%

Dubai time = GMT +4 hours