The U.S. currency has recently advanced versus 14 of its 16 most actively traded counterparts and may extend its near-term gains; even further especially against the EUR which appears to be quite vulnerable. The Dollar rose yesterday to 93.60 Yen from 93.44 Yen, and against the EUR it raised to 1.3504, the highest level since December 15.

The greenback advanced after U.S. President-elect Barack Obama said he favors an economic package of about $775 billion. With this planned U.S. stimulus package investors are betting that this would help the world's largest economy emerge from its recession more quickly than most countries. According to analysts, investors are leaning toward EUR selling because there appears to be growing signs that the European Central Bank (ECB) will cut Interest Rates during its next meeting.

However, the recent week's gains in the U.S. currency versus the EUR may be limited by speculation that U.S. services activity shrank to the lowest level since records began in 1997. Economic reports are showing that fewer Americans signed contracts to buy existing homes in November and factory orders are falling for a fourth consecutive month; this is likely to weigh heavy on the Dollar. Moreover, several analysts have said that given the Dollar's sharp gains over the last few days, the currency may be due for a short-term pullback.

Looking at today's trading, investors should note that an important indicator is set to be released at the opening of U.S. markets. The ADP Non-Farm Employment Change indicator will give a prediction about this Friday's upcoming employment data. If it indeed indicates that the employment sector is not shrinking as fast as previously thought, the USD will gain much support. However, the opposite may happen if this indicator points to a further contraction in U.S. employment.