Dollar recovered against the euro yesterday supported by a further drop in oil prices and improved confidence in the US financial sector.

 

Oil prices traded below $125 in the last session at a seven week low, after the release of US crude inventory data, which was better than expected by the analysts.

 

At the same time, the US House of Representatives prepared to vote on a measure that is expected to help the housing sector recover from its worst downturn since the Great Depression. The White House said President George W. Bush will sign the bill into law.

 

Supportive comments from top officials - Philadelphia Federal Reserve Bank President Charles Plosser and US Treasury Secretary Henry Paulson on Tuesday also influenced the traders’ sentiments.

 

According to the Federal Reserve official, interest rate rises may be needed before labor and financial markets recover.

 

But according to the release by Office of Federal Housing Enterprise Oversight, US home prices fell 0.3 percent on a seasonally-adjusted basis from April to May. For the 12 months ending in May, the prices fell 4.8 percent.

 

US housing starts and building permits rose unexpectedly in June; but starts of single-family homes dropped 5.3% to a seasonally adjusted annual rate of 647,000, the lowest in 17 years. The unexpected rise in total housing starts was mostly on account of a recent change in building permit rules for multi-family units in New York City.  

 

The greenback had been under pressure since the Federal Reserve left interest rates unchanged at 2 %, as economic fears persisted amid mixed data from various sectors and upside risks to inflation.

 

Amid the combination of rising inflation and struggling economies, Fed decided to hold rate steady.

 

In spot, dollar closed at 1.5689 (1.5783) against the euro, after trading in the range 1.5668– 1.5798.

 

Weakness expected above 1.5890. Resistances are 1.5800, 1.5600, 1.5507; supports 1.5988, 1.6048, 1.6220.

 

Last day, DEUR Sept. traded in the range 157.50 – 156.35 and closed at 156.39

 

TECHNICAL OUTLOOK (Intra-day)

 

DEUR (Sept)    - Bullish above 156.93; bearish below 156.47

COMMODITY	CL.RATE	SUP .2	SUP.1	RES 1	RES 2
DEUR (Sept)	156.39	155.00	155.88	157.48	158.20

 

DATA TO WATCH

2008 July 24