The dollar has started 2010, right where it left off, as in early morning trading, it has strengthened against all major currencies. Forex traders are attributing the move to Japanese investors pairing their euro holdings and buying dollars on expectations that the US FED will be raising interest rates quicker than the ECB. It remains to be seen if Forex traders will continue their rotation into the dollar, or is today's dollar strength attributed to isolated buying institutions waited until 2010 to enter.
On Friday, Non-Farm Payrolls numbers will be released; therefore Forex traders are expecting to receive a quick answer to this question. The item to watch for is how the dollar trades versus moves in the equity markets. If US equities rally on favorable US news, and the dollar retreats, as traders seek riskier investments, it may indicate that Forex traders are skeptical about the dollar's long-term strength. However, if the dollar follows the moves of stocks, it will probably be seen as a bullish sign for the greenback.
The EURUSD hit two week lows this morning as it traded to a low of 1.4259. Technically, the EURUSD appears very weak, as its down moves have been much sharper than its gradual-like moves higher. This could be indicating that traders that are looking for bounces in the pair aren't taking chances on a protracted rebound, and are jumping off, at the first negative sign. Forex traders are watching to see if the 1.4215 from two weeks ago can hold. Looking ahead, the ECB meets on Thursday; however, the Forex market isn't anticipating any rhetoric from the ECB to help the euro's cause.
EURUSD Support/Resistance 1.4215/1.4350
Traders are watching the GBPUSD to see if it can maintain it strength that it had at the end of last week. Late buying for 2009, caused the GBPUSD to leap from 1.5840 to 1.6240 over the course of 24 hours last week. So far, the pair has traded back below 1.6100, but appears to have support at the 1.6050 level. Lookinh ahead, UK Manufactuirng PMi numbers will be released today. If the numbers are worse than expected, and 1.6050 doesn't hold, there is very little support to keep the GBPUSD from falling further.
GBPUSD Support/Resistance 1.6050/1.6240