· Jump In US Consumer Confidence Does Little To Help Dollar
· German Confidence Tells Tales Of Increased Consumption
· Pound Slides for Yet Another Day As Rate Cut Rumors Resurface

By Vicki Schmelzer
NEW YORK, Dec 28 (MNI) - The dollar rallied unexpectedly against most major currencies Wednesday, with early greenback gains driven initially by sales of both yen and sterling, traders said.

The overall dollar demand seen later was attributed to a variety of sources, from talk of last minute Homeland Investment Act repatriation, often a convenient story to explain a suddenly stronger dollar, to light speculative positioning.

After posting highs near $1.7409 overnight, sterling sold off sharply so that the pair opened the U.S. session near $1.7375.

Cable then began to ratchet lower, eventually breaking decisively below the prior December lows near $1.7260, to test lows near $1.7127.

Around the same time, dollar-yen began to climb also and soon vaulted pivot resistance at Y117.70 to test highs near Y117.95.

Sterling was trading at at $1.7155 and dollar-yen at Y117.90 in late afternoon action Wednesday.

The key breaks in sterling and dollar-yen, if sustained, would then target their most recent dollar highs at $1.7043, seen Nov. 28 and Y121.40, seen Dec. 5.

Traders warned earlier that it was only a matter of time before the euro followed the trend of other pairs and played catch-up.

Indeed, the euro fell from overnight highs near $1.1932, to test lows near $1.1813 in afternoon action, before stabilizing at $1.1832 heading into the close.

“Today, there was a lot of technical damage done,” said one U.S. trader.

In the euro, the run-up to $1.1930-40 and subsequent sell-off to the euro’s 40-day moving average near $1.1815, was being eyed with great interest, he said.

“We haven’t gotten below that level for four days in a row,” the trader pointed out.

Should the pair begin to edge below $1.1800, a new wave of selling could be seen that pushes the euro back towards $1.1700, levels last seen earlier in December, he added.

In other markets, spot gold closed at $516.00/oz, down from the day’s high near $517.70, seen in U.S. action, and up from an overnight low of $508.50.

“A move back above $512 is very positive, with resistance above now expected at $520-$525,” said James Moore, precious metals analyst at TheBullionDesk.

Solid underlying Asian demand, both late last week and Wednesday, has served to give gold a lift, he said.

Also, Moore said, speculative demand has “given both gold and silver a nice little shine.”

However, he warned that price action is illiquid and noted that “trading conditions are also pretty thin out there so it’s not taking that much ammunition to create a reaction.”

SYDNEY Dec 29 (MNI) - The US dollar eased back in early trade here as players consolidated positions after the US unit put on solid gains overnight on some upbeat US consumer confidence data, dealers said.

Overnight, the government reported that the US Conference Board measure of consumer confidence rose to 103.6 in December, up from a downwardly revised reading of 98.3 reading for November.

The data raised hopes that the US Federal Reserve’s cycle of rate hikes may continue into the near term after Fed officials had hinted at their last policy meeting that conditions for an end to the cycle are now emerging.

At 11.00 a.m. in Sydney the US dollar was trading at Y117.74 from Y117.75 in late New York trade while the euro was at $1.1845 from $1.1839.

National Australia Bank market strategists said the strong consumer confidence number supports the view that the Fed is again likely to raise its key rate by a further 25 basis points at the next Federal Open Market Committee meeting on Jan 31.

The NAB strategists said both the University of Michigan measure of consumer confidence and the Conference Board measure have now largely returned to their pre-hurricane levels, removing one of the key downside risks to the US economy.

They also noted that improving European data is providing the euro with support.

The forward-looking GfK German consumer-confidence indicator signaled a 3.8 reading for January, above consensus forecasts, while the December figure was revised to 3.4 from 3.1 points.

“It’s difficult to determine trends at times like this. But equally, it is hard to ignore that the pieces of data we are getting are all pointing to better growth in most parts of the globe,” the NAB strategists said.

Time (NYT)	Location	Description	Forecast	Previous	Actual
2005.12.27 18:50	JPN	Nov Large Retailers’ Sales - prelim y/y	-0.3%	3.3%
2005.12.27 18:50	JPN	Nov Industrial Prodn - prelim	2.0%	0.6%
2005.12.29 04:00	E-12	Nov M3 growth y/y	8.1%	8.0%
2005.12.29 08:30	US	Weekly Jobless Claims	325K	318K
2005.12.29 10:00	US	Dec Chicago PMI	60.0	61.7
2005.12.29 10:00	US	Nov Existing Home Sales	7.0 mln	7.09 mln

After cristmas holyday the week started with falling of the EURUSD and USDJPY. It was caused by the bad jobless data released from Japan at 18.30 ET. (4.6%, prev 4.5%).
Forex traders may trade EURUSD at 1.1830-1.1840, USDJPY at 116.60-116.70

US home sales fell sharply, by 13.1%, the biggest fall in 12 years.
Previous value 1404K for october, actual 1245K for november.
The FOMC hikes credit rates for mortgage and people don’t want to take a loan to buy home with such rates.
It opens a great chance for EUR. Speculative forex traders are started to buy EUR/USD.

EUR/USD snored through most of the European session today with worse than expected EU eco data having no impact on holiday thinned order flows. French Business Confidence printed at 102 versus expectations of a rise to 104 and French Production Outlook indicator slipped to –2 suggesting that growth in the region’s 2nd largest economy will remain sub par in Q4 dragging down the performance for the overall block in the process.
Additionally EU Current Account data widened to –9 Billion gap from -4.5 Billion the month prior. The market however shrugged off the news, with EUR/USD trading virtually unchanged at 1.1880 as most dealers thoughts turned to the slopes of Vail and Gstaad. Trading is expected to be listless through most of next week and we along with most of the FX world will be gone until after New Years.

SYDNEY Dec 22 (MNI) - The US dollar was trading firmer against the euro and yen, gaining additional support into the year-end on speculation of increased repatriation flows of foreign earnings of US companies, dealers said.

They said the US dollar was bought overnight on the rumors US companies are increasingly taking advantage of the reduced tax rate from the repatriation of offshore earnings under the Homeland Investment Act which ends this year.

Dealers said the final US September quarter gross domestic product data and deflator inflation measure also aided US dollar buying, increasing the risk of further rate hikes beyond the expected 25 basis point hike on Jan 31.

“The US dollar again benefited from increasing expectations that the Federal Reserve will continue to raise interest rates to 4.5% and possibly beyond,” National Australia Bank currency strategists said in a market note.

At 10:30 a.m. in Sydney (2330 GMT), the euro was weaker at $1.1833 from $1.1835 in late New York trading while the dollar was firmer at Y117.40 from Y117.25.

Dealers said the euro fell to a low of $1.1800 overnight from $1.1908 on the repatriation rumors, while dollar-yen reached a high of Y117.50 before drifting lower.

The Euro rebounded against the dollar today following stronger economic data. The German IFO jumped from 97.8 to 99.6 in December as business sentiment continued to improve. This should come as no surprise after the encouraging ZEW survey released earlier this week. Overall, the story in Europe remains very much the same. Like a broken record, we continue to sing the tune that even though the business sector and the export market have rebounded thanks to the weaker Euro, the average citizen and worker have yet to feel the benefits of the recovery.

SYDNEY Dec 21 (XFN) - The US dollar was trading mixed against the euro and yen in early Asian trade Wednesday, but a recent sell-off in the currency ground to a halt following strong US housing data for November overnight, increasing the likelihood for further rate hikes, dealers said.

They said the US dollar rebounded overnight in thin trading, with US housing starts data rising to the fourth highest level on record and building permits rising to their third highest level on record.

“Evidence of continuing strength in housing activity served to raise the likelihood that the Federal Reserve would continue to increase interest rates,” National Australia Bank (NAB) currency strategists said in a market note.