The value of the dollar continues to sink even in the midst of positive earnings reports and a modest improvement in the level of private company hiring during July.

One euro is worth $1.3210 in early Wednesday (August 4) New York currency trade after peaking at $1.3242 earlier. The euro remains in a strong upward trend against the dollar after its credit crunch fall in early June. It is now up nearly 14 pips in two months time.

Strong resistance is going to come into play in the $1.35 area, based on medium-to-long term technical charts. This could prove to be a decisive point for the euro-dollar as to whether it remains in an upward move or reverses course.

The British Pound is trying to regain the $1.60 level for the first time since mid-February. It has been on the rebound after touching down at $1.4227 in late May. There is plenty of technical resistance in the $1.60-1.62 range that could pose a challenge for the Pound going in the next few days and weeks.

It was the dollar-yen ratio that made the biggest splash in overnight European trade, reaching a historic low point with the dollar dropping to 85.31 yen. A quick bounce has the dollar back over 86 yen, at 86.08, in early New York trade.

In other positive economic news, home loan demand was up for the third straight week and Toyota’s $2.2 billion profit was viewed by Wall Street as a positive sign of an improving auto sales market.

However, it is caution among American consumers and businesses to spend and a stable low to no interest rate policy that appear to be keeping the dollar under wraps.

Retail data for July shows that while Americans have been travelling more, they are still hesitant to delve into more discretionary purchases like jewelry and furniture. Consumer spending remains an integral part of the recovery effort as it accounts for roughly 70 per cent of the US economy.

The Fed has maintained its stance on an ‘extended’ period without interest rate hikes. Until the Board is comfortable that the economy is in good shape, this rate policy makes the dollar less desirable without a significant interest yield.