*Last Updated May 11, 2006, 11:52 pm

Daily report by CMC Markets

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FOREX ANALYSIS

Dollar eyeing downbeat end to week as currency falls from favour.

May 12th - The dollar has pushed lower once again in overnight trade as concern over a change in stance at the FOMC resurfaces. As a result of this there’s little doubt that US economic announcements due later in the session will be closely watched, whilst the scope for a degree of profit taking ahead of the weekend break also can’t really be ignored at these levels. The University of Michigan consumer sentiment reading can again be expected to give some indication as to where inflationary pressures might be coming from, but another downbeat reading here will give the dollar little in the way of sustainable support and again we’re coming close to testing a number of key psychological levels - USD JPY has already made an attempt on the 110 level, the Euro is fast approaching 1.30, whilst cable is now edging towards 1.90. French and Spanish inflation data may also provide a little direction in the near term but right now consensus is simply that many just don’t want to be long of the dollar in light of slowing yields as we move into the second half of 2006 and this repositioning has left the greenback under some significant pressure on the downside.

Tim Wilbraham and Enis Mehmet



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