The dollar was showing a mixed performance through Tuesday and into the early hours of the Asian session that was facilitated specifically by low activity levels. Through the end of the US session, daily ranges on the majors were still exceptionally small – especially when we compare them to the volatility of last week. When will we see another run with the level of consistency and intensity that the market put in for through the opening week of the year? That depends on whether or not a solid fundamental trend can develop behind the greenback and/or the financial markets themselves. What is needed is a catalyst to direct traders’ to attention to the same focal point and thereby the same trades. We may have just such a catalyst in the coming European session. And, in the meantime, the various dollar-based majors and other asset class benchmarks are positioning for much more prolific moves in the near future. 

Looking across the majors, the pairs are in different stages of performance. A favorable scenario is developing for USDJPY, USDCHF and AUDUSD; which have furthered their respective greenback-favorable trends. This is an interest mix to maintain its dollar drive as the first two set the world’s reserve currency against other safe havens and the third is a high-profile carry currency. In contrast to the Aussie dollar-based pair, both NZDUSD and USDCAD have held to burdensome congestion – better reflecting the lack of guidance on the S&P 500 and other speculatively-sensitive capital market benchmarks. And, then there is EURUSD and GBPUSD; which are in the early stages of potential dollar-bearish reversals. This mixed performance is a sign that there is no common denominator for the FX markets. In the absence of a clear drive for the greenback, these pairs are left open to: safe haven debates, a deteriorating economic outlook for Australia, frozen carry trade interest and localized financial concerns.

Over the past 24 hours, we were offered a surprisingly comprehensive assessment of the dollar’s health – though it was perhaps a little too subtle for the masses to pick up on and react to. For data, the December NFIB Small Business Optimism survey and November Wholesale Inventory figure may seem second tier data at best; but they are barometers for critical points of the US economy. Small businesses account for the vast majority of jobs in the United States; which generates some concern with the 92.6 reading that pulled the confidence gauge back from its December 2007. And, though there is evidence of improvement in most sectors; the economy’s recovery has been heavily encouraged by inventory building. That said, wholesale inventories dropped for the first time since November of 2009 (by 0.2 percent). Nonetheless, Philly Fed President Charles Plosser projected growth of 3 percent this year and 3.5 percent through 2012. And, to remind us that the potential for an economic recovery is balanced by the ill-effect of stimulus; the hawk repeated his reservations of the current quantitative easing efforts and said a steady recovery may necessitate an easing of the program. Growth and stimulus issues, however, will struggle to unify traders. To get the dollar moving; we need to play to the dollar’s more inspiring role: as a safe haven. We may see just that with the upcoming Euro event risk.