*Last Updated May 15, 2006, 12:09 am

Daily report by CMC Markets

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FOREX ANALYSIS

Dollar remains vulnerable as key psychological support levels approach.

May 15th – The dollar is undoubtedly under pressure right now not only from the slowing outlook for the US economy but also since there’s a growing tendency for countries to shift reserves out of the greenback and into the likes of the Euro. However, the dollar has come a long way off in recent weeks, creating some opportunities with a number of the banks booking profits off EUR positions this morning, in turn initiating a short run of support for the USD as once again it edges back from the perhaps inevitable test on 1.30. It’s going to be a relatively quiet start to the week for economic data unless either TICS data or the Empire state manufacturing survey hold any surprises today so the churning phase may well continue but tomorrow’s US numbers - namely PPI and capacity utilisation – stand to provide more direction in the near term. The softening in oil prices may provide some additional support but again the question has to be asked as to just how sustainable this is. Certainly any escalation of the situation in Iran stands to squeeze available supply further and push prices higher still with a potentially damaging impact on the US economy in particular. It’s certainly shaping up to be an interesting week for currency markets – volatility looks likely but the dollar may well see further exposure on the downside.

Andy Cottrill and Enis Mehmet



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