Dollar takes a breather

Dollar eased against the euro yesterday despite an unexpectedly span data from the US Service sector.

Dollar eased against the euro yesterday despite an unexpectedly span data from the US Service sector. According to data released yesterday the ISM's non manufacturing index rose to 52.0% in April from 49.6% in March.

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.

Slightly spaner than expected U.S. manufacturing and consumer spending data released last week 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 month in a separate release the US Commerce Department had 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 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 1.5493 (1.5428) against the euro after trading in the range 1.5518 1.5421.Last day DEUR June traded in the range 154.88 154.00 and closed at 154.67.

Spot Dollar vs Euro

TECHNICAL OUTLOOK (Intra day)

DEUR (June) Bullish above 154.83 bearish below 154.37