What an explosive day we had today so far, with EUR/USD trading heavy and breaking important support levels, firstly at 1.4520 which we said yesterday, and then 1.4485 to make a new monthly low at the time of writing at 1.4464.
As we said yesterday, dollar seems to be on a corrective mood and today that confirmed with the first break of 1.45. The pair is trading out of bounds and itâ€™s heavily oversold however a clear break of 1.4450 puts 1.4425 as the next level to watch.
Todayâ€™s CPI data was higher like it was expected, with traders and analysts now predicting no more rate cuts from Bernanke and pals in the next few meetings.
The fact that we see such heavy flows today in the dollar has something to do with Friday being the last trading day for year end portfolios and traders buying back the dollar in order to close their books.
It will be interesting to watch where EUR/USD will close tonight and a close below 1.45 certainly makes things more difficult for euro bulls!
Who would predict that December would turn out to be a positive month for the greenback, as history shows that the last month of the year we have dollar selling all across the board!
USD/JPY also climbed up towards 113 and briefly broke the resistance level, marking 113.15 the highest level for many weeks!
With todayâ€™s move, the dollar has certainly puts wheels in motion for reversal of the recent trend. The question that arises now in everyoneâ€™s mind is will it gain further in order to complete the correction started from 1.40 to almost 1.50? Well, from now until the end of the month it will be crucial to watch economic data out of the US and with better numbers printing we might start to think that the US economy is moving away from the big scary recessionâ€¦
EUR/USD might reach new low levels today, as traders are still in a stop hunting mood, however we favour small buy positions in the approach to 1.4435 which is good support level and can give quick profits for the pair to correct back towards 1.45.
Letâ€™s see what next week will bring us in this volatile and liquidative environment and if the greenback will keep its gains till the close of the year!