The dollar declined today after Abu Dhabi bailed Dubai World of its rising problems by extending a $10 billion lifeline which prevented Nakheel from defaulting on its Islamic bonds maturing today. The move increased confidence in the market and eased rising woes and jitters over default. European shares managed to advance on the back of the move and investors head again into market seeking higher returns and indulging in risky assets.
The data that was released from Europe was generally positive today despite the contraction of industrial output and the contraction in employment; yet generally they were inline with persisting signs of recovery. The euro was in general supported with the data where it advanced after hitting its low at 1.4596 and the pair is now trading with positivity around 1.4650 close to its midrange for today after setting the high at 1.4685.
The negative pressure prevails for the EURUSD, and technically we can see that trading below 1.4695 will keep the downside wave most favored over intraday basis despite the rise that was recorded today; nevertheless, shall the positive sentiment prevail in the market today we might see the euro extending its gains and heading further to the upside as the dollar declines.
Sterling was not at all lucky today as the euro, where despite the gains recorded by the benchmark index, FTSE 100, since the start of the session, sterling failed in preserving the upside wave and settled for setting its highest versus the dollar at 1.6324 and trading now near its lowest set at 1.6188. The 1.6155 remains the most critical level for the pair and trading above this level revitalizes the potential for the pound to limit its acquired losses, while at the same time if the daily closing was set today below this level it will heavily extend the downside wave towards 1.60 areas.
Japanese markets were rather stable today and did not benefit from the optimism much, where Nikkei attempted to close in the green after the drop it started with, yet still closed slightly lower. On the other hand, the dollar is suffering a strong selling wave which preserved its negativity versus the Japanese yen where the USDJPY traded among 89.32 and 88.29 and currently the pair is trading around its lowest today at 88.50.
This is merely the start for a hectic week ahead, which will reveal major inflation data from us from Europe and the US alongside labor data from the United Kingdom and confidence from Europe, and most importantly the FOMC decision in which investors will be looking for more signs over the monetary policy outlook after the unexpected drop in the US unemployment rate earlier this month. We might witness heightened volatility this week yet the dollar is still shining and is trading at its highest versus a number of major currencies for the past month-and-a-half.