Pre-Holiday Profit-Taking Pressures Dollar
The U.S. Dollar finished lower against a basket of currencies under thin, pre-holiday trading conditions. Today’s weakness could have been worse had it not been for better than expected initial claims and durable goods. Both reports signaled an improving economy.
Although it is difficult to gauge the actual reasons behind the weakness, it’s easy to speculate that the huge run-up in the Dollar the past few weeks is making it ripe for profit-taking.
The most important thing that traders should take away from these markets this week is that sentiment is shifting away from risk-based decision making to more fundamentally driven decision making. The rally on Tuesday, Wednesday’s weakness and today’s action are prime examples. For example, traders drove up the Dollar on good existing home sales news on Tuesday while driving it lower on poor new home sales on Wednesday. Thursday’s reports helped stop a possible sharp decline.
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