A few more days till the end of the year and dollar is still under pressure against most of its other counterparts.
EUR/USD broke 1.4570 important resistance, and hasnâ€™t looked back since then, printing a new high by the minute. At the time of writing the pair is just above 1.47 after 1.4680 was taken out easily. Under normal market conditions the pair would meet bigger resistance touching these levels, however the fact that its still holidays for many traders and therefore the liquidity is very thin, gives euro bulls the upper hand to put further strength in the European currency. Also, the geopolitical events which are unfolding these days after the murder of Benazir Bhutto is weighing on the dollar and this time flight to safety sees a lot of Swiss franc buying and also euro too.
The economic data out of the US yesterday, gave us worse than expected durable orders which didnâ€™t do dollar any favors and gave the green light for further selling in the pair.
Today the only economic data are Chicago PMI and New Home Sales out of the US and both are expected to be lower than previous months. Of course with the already negative dollar sentiment still priced in the markets, any bad news is welcomed with a sell off in all dollar related pairs.
EUR/USD didnâ€™t manage to break 1.4710 so far and now pair has consolidated since then down to 1.4665. As long as pair is above 1.4630 there is further room for upside moves towards 1.4750.
GBP/USD is struggling to gain even though it made it briefly just above 2 marking daily high at 2.0020. The pair has corrected since then and tested important support level at 1.9935. The pound is suffering from heavy selling against the euro, as EUR/GBP saw new lifetime highs today above 0.7360. Next level to watch for the pair is 0.7385 ahead of 0.74.
At the beginning of next week the markets are half operating therefore we might see thin trading conditions all across the board. Beware however for the 31st of December, the official last trading day of the year, as only a few players will be participating in the markets making trading quite volatile. The dollar might continue to be under pressure as more economic data might show further slowing in the economy, however come January and we might see the greenback strengthening again especially against the euro, as historically the first month of the year starts with dollar strength!
2007 had really been a year to remember what with euro almost hitting 1.50, pound well above 2 and economic crisis in the eyes of sub prime mortgage caused a market turmoil forcing the FED to cut rates abruptly.
We have seen it all, dollar weakening exceptionally, risk aversion causing carry trades to drop 1000 points in one day, stocks falling like there was no tomorrow, oil just a few cents below 100 and a Canadian dollar below parity!
The question is now, what will 2008 bring us? Will EUR/USD touch 1.50 and even go towards 1.60 as many analysts rushed to predict? Will indeed oil surpass 100 and trade above?
All will be answered in the New Year which starts in a few days and certainly will give us many new events and excitement to keep us tradingâ€¦