Dollar rose against the euro yesterday as weak economic data from the Euro zone put pressure on the euro helping the counterpart.

Dollar rose against the euro yesterday as weak economic data from the Euro zone put pressure on the euro helping the counterpart.

According to a Eurostat release yesterday Euro zone retail sales fell 0.4 percent in March from February and were down 1.6 percent year on year.

The market players are awaiting key Central Bank policy meetings in Europe the European Central Bank and the Bank of England will announce the results of interest rate policy meetings today.

The Labor Department reported yesterday that the productivity of the US non farm business sector rose at a 2.2% annual rate during the first months of the year.

Unexpectedly span data from the US Service sector underpinned the dollar. According to the data released on Monday the ISM's non manufacturing index rose to 52.0% in April from 49.6% in March.

But a report from National Association of Realtors showed that pending home sales in the US fell 1.0% in March an indication of continuing weakness in the housing market.

The greenback was affected by the Federal Reserve s senior loan officer survey which found Consumers and businesses found it harder to borrow money over the past three months which indicates that the credit crunch might be still worsening despite the Fed s grave efforts.

But Dollar had strengthened against the European currency last week after government report showed the U.S. economy shed just 20 000 jobs in April fewer than economists had expected. Continued profit booking by the traders in the Euro amid optimism that the Federal Reserve's cycle of cutting interest rates might be done and expectation of recovery in economy in light of the series of rate cuts.

According to the Labor Department U.S. economy shed just 20 000 jobs last month from an upwardly revised 80 000 in March. Markets were expecting job losses of 80 000 according to a Reuters poll. The national unspanployment rate slipped to 5.0 percent from 5.1 percent in March compared with forecasts of a rise to 5.2 percent. The data changed the view of immediate another rate cut and are supported the greenback.

The Fed last week 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.

Medium Term OutlookExpecting 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 1.5390 (1.5530) against the euro after trading in the range 1.5538 1.5364.Last day DEUR June traded in the range 153.40 154.87 and closed at 153.76.


Spot Dollar vs Euro

/


TECHNICAL OUTLOOK (Intra day)


DEUR (June) Bullish above 154.12 bearish below 153.67


COMMODITY

CL.RATE

SUP .2

SUP.1

RES 1

RES 2

DEUR (June)

153.76

152.55

153.10

154.73

155.35



DATA TO WATCH

2008 May 8

GMT

Currency

Forecast

Previous

8:30am

USD

Unspanployment Claims

370K

380K

10:00am

USD

Wholesale Inventories m/m

0.5%

1.1%

Dubai time = GMT +4 hours