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The US Dollar moved higher in overnight trading despite a second consecutive day of gains across Asian stock exchanges. Price action is likely to be muted in European hours with and little event risk on the economic calendar and thinning liquidity ahead of the Good Friday holiday.

Key Overnight Developments

• Commodity Currencies Follow Stock Markets Higher
• Euro, British Pound Extend Losses Against US Dollar

Critical Levels

The Euro extended losses in overnight trading, slipping as much as -0.6% against the US Dollar. The British Pound followed suit, giving up as much as -0.4% to the greenback.

Asia Session Highlights

With no market-moving data on the economic calendar, overnight trading saw forex markets extend directional moves from New York hours. The commodity bloc managed to add to intraday gains while the rest of the majors continued to sink against the US Dollar. The net result amounted to a net gain for the greenback, a notable departure from recent trading dynamics considering Asian stock exchanges followed Wall St higher, rallying for the second consecutive day to add 0.9%. Risky assets surged after Wells Fargo reported a record quarterly profit, boosting investor confidence. While it is premature to say that a new inter-market paradigm is upon us - indeed, the odd price action may simply be due to thin liquidity ahead of the Good Friday holiday - it is certainly something to be monitored in the days ahead to see if dismal fundamentals across Europe will mean the Euro, Pound, and Franc no longer look attractive when risk-taking rises.

Euro Session: What to Expect

Fresh signs of deepening Euro Zone recession will be on offer in the forthcoming session: French Industrial Production is set to fall a hefty -14.8% in the year to February, the most in at least 28 years, on dwindling global demand; meanwhile, the Consumer Price Index is set to show that inflation slowed to an annual pace of just 0.4% in March, the lowest in nearly a decade.

On balance, price action is likely to be muted with the US markets closed for the Good Friday holiday and little event risk on the European economic calendar. Technical positioning sees the US Dollar setting up to challenge the major currencies after losing as much as 7.8% on average since early March.

To contact Ilya regarding this or other articles, please email him at ispivak at dailyfx dot com.