Wednesday, May 23, 2007

Greenback Extends Gains, China Talk in Focus

The dollar extends gains across the board after last week’s unexpectedly strong data from housing, manufacturing, and labor markets, which diminished expectations that the Fed may need to cut interest rates this year.

This week’s economic calendar is quite light, with only US durable goods and housing data due on Thursday and Friday. The market then will focus on the talk between China Vice Premier Wu Yi and US Treasury Secretary Henry Paulson this Tuesday and Wednesday in Washington. US has always been calling for a more flexible Chinese yuan and faster appreciation.

EURUSD will face interim resistance at 1.35, followed by 1.3530 and 1.3550. Additional ceilings will emerge at 1.3580, backed by 1.36. Support starts at 1.3450, backed by 1.3420, 1.34 and 1.3380. Subsequent floors are eyed at 1.3350.

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