• Home ::
• Fundamental ::
• Market View ::
• FX Daily Update

• Send
• Print
• Add To

FX Daily Update

This report has been deactivated

Crunch Time for the Dollar This Week!

Mon, Dec 1 2008, 09:33 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

What a week this one might turn out to be what with economic calendar being full of important economic events and markets being cautious of any decisions regarding the global economic situation! Where should we start? From the speeches by the “dynamic duo” Bernanke and Paulson today, regarding the FED latest policies, which traders will monitor closely for any signs of further cuts in the coming weeks? Or ECB and BOE rate decisions later in the week which may determine the short term direction of the euro and the pound? And to top it all, don’t forget the “icing on the cake” the nonfarm payroll data which might give us another nasty taste of how bad the economy performs in the US…

EUR/USD is still trading within ranges of 1.2550-1.3050 and last week’s trading action was not strong enough to take out these levels with the pair reaching 1.3050 only to drop once again below 1.27. Traders are not eager to commit one way or another especially knowing that this week might be a key to euro and dollar fate! A clear break of 1.2630 might open way on the downside towards 1.2560.

Today the economic calendar has a few releases worth watching, with UK Halifax HPI index and Manufacturing PMI which both may show more evidence on how grim economic conditions are and Euro zone Retails sales and PMI which unless they come out very different to forecasts may not really provide any action. Later on we have ISM Manufacturing out of the US which is forecasted to print another low number.

We know that there are many economic data to choose from this week and some are more important than others, but the question still remains how will they affect the dollar? Well, the answer lies as to how the future markets will react on them and if there is further gains on DOW JONES and the rest of the markets, then dollar may weaken! The only way this scenario is not likely to work is if ECB lowers their rates by far more than it is anticipated and Trichet is really dovish signaling many more cuts to come! Then in that case, euro may fall heavily and that could give dollar bulls the upper hand again.

Let’s not forget that we saw the dollar strengthening immensely over the last few months with or without bad economic data and that was purely the fact that risk aversion was taking control and traders were looking the dollar in a new light as the safe haven currency. This may continue to happen over the next weeks and only a clear change in negative sentiment can alter that. So far this does not look likely, as the traders fear and uncertainty can be felt daily all across the globe.

EUR/GBP is another pair which ended last week on interesting note, after it failed to break 0.85 once again and dropped aggressively down towards 0.82. The daily and weekly close last week suggests that there may be further room for a deeper correction and next level to watch may be 0.8180 ahead of 0.8130. However, with both ECB and BOE rate decisions pending this week the volatility may be high and depending on what the banks do the pair can potentially retrace all recent losses.

Let’s see how today the markets react today with US traders all back from their Thanksgiving holidays and the rest of the markets ready for an interesting trading week! Don’t forget that markets gained for the last few days and although this is good news, this week’s economic events could easily wipe out all the profits in no time… Time and market sentiment will tell!

Published on  Mon, Dec 1 2008, 09:36 GMT