As we are moving towards the end of the week, there is a lot going on to keep us busy ahead of the Christmas holidays!
Yesterday, currencies were moving within tight ranges, with EUR/USD still being trapped in 1.3965-1.4435 levels. A clear break out of these levels might give us short term the next move towards 1.43 or 1.45. Economic data out of the US were mixed yesterday, with Housing Stars although printed a better number than expected still it was quite bad. However, although dollar got sold after the news, the move wasnâ€™t able to take out 1.4425 levels and euro gave back all its gains. We do notice that although pairâ€™s movements are mute, dollar seems to enjoy its gains and euro bulls are defeated for the time being.
The economic calendar is almost empty today, with German IFO printing a lower number which makes the usual market jitters about dampening of European economy coming back into focus. Today we also had Trichetâ€™s testimony regarding the problems that markets are facing when it comes to low liquidity. The fact that all central banks are coming together to help out with the recent liquidity crisis, gives investors some kind of relief and therefore that could help the dollar in the forthcoming sessions.
The biggest mover of the day was once again GBP/USD, as the pair broke finally the very important 2.0100 psychological level and printed 2.0032 where it rebounded modestly. The reason for the sell off in the pair was BOE minutes which gave the impression that the bank is thinking of further cuts in the near future. The fact that 9 out of 9 decided for a cut rate, tells us how worried the bankers are what with recent Northern Rock crisis still fresh in everyoneâ€™s minds. House prices are still down and analysts predict that economic data out of England will continue to disappoint.
GBP/USD is poised to break 2.0025 and a possible break of that level will put further pressure in the pair with a possible break of 2.
GBP/JPY is moving downward too, and the earlier break of 226.40 is keeping the pair pressured for a try of 225.80. We keep a sell view in the pair, with a possible target of 225 which is a very good support level. However, beware of the BOJ interest rates tomorrow as a dovish statement from Fukui can put yen back on the defensive.
With Christmas around the corner and most market players getting ready to call it a day, there is a risk of choppy trading in all major pairs and thanks to thin liquidity we might even see extreme trading all across the board. So, stay tuned and remember a new year is approaching and whatever happens, new trading opportunities will arise.