The economic data was mixed for the dollar with CPI coming slightly higher but retail sales worse than expected.
Last weekend we had the OPEC meeting and there was a lot of noise amongst the traders who were saying that due to the weak dollar in recent months, UAE would decide to change their dollars into other currencies and possibly in to euros. However due to the current dollar weakness, the OPEC officials avoided making any comments because that could as they said create more reasons in the markets to sell the dollar further.
This week we have the FOMC meeting and we shall see how the market react to that, after the latest cut by the the FED. Many analysts believe that Bernanke will leave rates unchanged for now, as inflationary pressures will hit the American economy in the short term. It is clear though that the fear and uncertainty is alive in the markets and every time there is some kind of rumor about another Bank having liquidation problems, all carry trades continue to slide and traders get out of risky positions.
This week we also have Housing data, with Housing starts and building permits being the most important ones. Most analysts believe that the numbers will come lower and therefore that might dampen the dollar further.
It is important to take into account that this Thursday is Thanksgiving Day and the US markets will be closed, therefore some traders might use this excuse for a long weekend starting from Wednesday. Be aware of that day though, cause if we look back at what happened last year, we shall see that EUR/USD was trading heavily and out of bounds as some big players took advantage of the thin liquidity and moved the pair 300 points in a what seemed to be a stop hunting session.
There is that risk this year as well, however depending on where EUR/USD will be on that day the move might be even more extreme as 1.50 is the favored target for the time being. If for example the pair is at 1.47, thin liquidity might create aggressive bids and take the pair to extreme overbought levels. It is clear that the trend is still up and at every opportunity, traders sell the greenback.
EUR/USD is trading within 1.46-1.47 range this morning and it might continue this for the rest of the day, as volatility is low and the day is relatively quiet regarding economic data. The only news from the US that is worth seeing is NAHB index which gives us an idea of how the housing sector performed in the last month and its forecasted to be lower again as it was for the last 3 months.
Markets are looking for direction at the moment and dollar is in a wait and see mode. We believe that this week might give us a lot of trading action and with Thursday US Holiday just a few days away dollar might be in for another selling tripâ€¦