EUR/USD ended the NY session with a euphoric run up through 1.4850 to make new all-time highs.  JPY crosses also finished strong after a late day rally in US equities left the S&P 500 in positive territory.  Asia sat down and in defiance bought USD and sold the JPY crosses right from the start.  Profit taking pushed EUR/USD back into the 1.4820 area while EUR/JPY broke back below 163.00.  AUD/USD was also notably weak trading about 100 pips off its session highs.

Interestingly, crude oil is making new all-time highs and is fast approaching the $100 level.  Despite this, USD/CAD is far off its recent lows (Canada is a high cost producer of oil and thus benefits when oil is higher).  Other commodity currencies like NZD/USD and AUD/USD are also off their highs while EUR/USD has just made a new all-time high.  Are commodity currencies foretelling underlying USD strength?  What will happen when oil trades through $100?  Will we see commodity currencies catch up or will they continue to lag? 

Looking forward, expect more volatility as concerns of the US housing and credit markets continue to reverberate throughout the world.  Last year during Thanksgiving week we saw an explosive move higher in EUR/USD sending it through 1.3000 in very illiquid trading.  Markets are tenuous and with an even juicier target, 1.5000, in sight, we could see a repeat.  In any case, stay alert as currency markets are not on holiday this week…

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