U.S. Dollar Finishes Lower Following Signs of European Recovery

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The U.S. Dollar finished lower on Tuesday following reports from Europe signaling an economic recovery may be starting. The EUR USD rebounded after a German investor confidence report improved more than estimated. This news combined with last week’s GDP report showing growth in France and Germany may be enough to ignite the start of a rally. Despite support from the economic numbers, trader appetite for higher risk assets has to pick up or this rally will fizzle.

Based on the main range of 1.4447 to 1.4045, look for a possible retracement to 1.4246 to 1.4293.

A report showing U.K. inflation was better than expected triggered an early session short-covering rally in the GBP USD that gained strength throughout the day. Traders had been looking for inflation to decline based on the recent comments from the Bank of England Governor Mervyn King. Lately he has been hinting that the slow down in the economy would continue.

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