There have been no major fresh factors over the past 24 hours with markets still expecting low US yields. Expectations of Asian currency appreciation will also tend to undermine the dollar. Structural fears surrounding the Euro-zone are liable to increase. In this environment, it is likely to become more difficult to break Euro resistance levels. For now, there is scope for further dollar support close to 1.5050 with the potential for a move to 1.4830 over the next 36 hours on a reduction in net short dollar positions. Strong dollar gains remain unlikely at this stage with strong Euro buying on dips.
The Euro pushed higher in early Europe on Wednesday and tested 2009 peak levels close to 1.5050 against the dollar, but was unable to break resistance in this region. Following the failure to break resistance, the Euro retreated to the 1.4970 area late in Europe in a generally technical move.
There have been further reports of Institutional Euro selling at higher levels which also curbed currency support, although dollar sentiment was still weak which curbed any buying support.
Markets will continue to monitor Federal Reserve comments on the economy and monetary policy closely. Despite some evidence of unease over asset-market trends, there have not been any suggestions of a near-term increase in interest rates and this will tend to keep the US currency on the defensive. Increased expectations of Chinese yuan appreciation will also tend to be a negative dollar influence, although the Euro impact is likely to be measured.