*Last Updated July 20, 2006, 11:58 pm

Daily report by CMC Markets

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FOREX ANALYSIS

Choppy end to week as economic calendar dries up

July 21st - Fallout from two days of testimony by Ben Bernanke and the implicit suggestion that the seemingly incessant US rate hikes may soon pause has seen the dollar unwind recent gains of late. However, the temptation to start booking some profits off long USD positions by Asian traders as the weekend break nears can’t be ignored. It’s set to be a relatively quiet day ahead on the economic calendar so further direction off fundamentals may prove difficult to find, with the onus instead being more on posturing and adjusting existing positions. There’s still little consensus as to whether we’re going to see any sort of escalation in the Middle East conflict – the dollar had been sporting a war premium earlier in the week and although this has been eroded, the risk remains that neighbouring countries – particularly Syria or Iran – could become embroiled in the situation and the repercussions of this would likely be far more significant with the greenback standing to appreciate quite significantly as a result. Obviously monetary policy at each of the central banks remains a key factor in influencing markets so any additional analysis of Bernanke’s comments stands to provide further momentum but otherwise we could be in for a somewhat choppy end to the week.

Andy Cottrill and Enis Mehmet



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