The U.S. Dollar ended last week in a losing position to many of its currency counterparts due to a number of factors. However, at the beginning of today's trading it appears to have begun a rally against this recent downward movement. Ending last Friday down against the EUR and GBP, the USD has made small gains against both currencies rivals as of this morning, but vice versa with the JPY; earning moderate gains against the island currency and now appearing to weaken.
As Crude Oil's price rose almost $8, the USD no doubt weakened as a result. As most of the Majors lost ground throughout last week, traders were expected to begin unloading these over-sold, alternative currency positions and re-sell the USD with fresh vigor, adding an unexpected weight to the American currency. Moreover, with additional economic stimulus being added to the U.S. economy, the desire to hold safe-haven currencies has been reduced as risk appetite receives a limited return to the spotlight.
Rising oil prices, rallying stocks in response to bank bailouts, increased risk appetite, and a general unloading of USD buy positions has temporarily weakened the USD as of the end of last week. This week doesn't look much better, either. As U.S. banks close for the celebration of Martin Luther King Jr. Day across America, and many major companies report losses for the first time since 1991, traders may actually expect a low volume trading day for USD currency pairs and crosses.
This low volume may help the greenback rally against its counterparts as they undergo a series of negative news events throughout the week, while the USD receives few. Traders should look to a moderately strengthening USD, at least over the next few days, but be wary of major price movements as they may yet make an appearance.