Thin Pre-Holiday Trading Pressures Dollar
The U.S. Dollar is trading lower overnight under thin, pre-holiday selling pressure. 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 at this time is that sentiment is shifting away from risk-based decision making to more fundamentally driven decision making. The rally earlier in the week and yesterday’s weakness 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. Moving forward into the new year, it is important to note that volatility is likely to rise in the short-run as speculators and investors adjust to a new way to make trading decisions.
The EUR USD is up again overnight. The chart pattern suggests a possible weekly reversal up. In addition, this currency pair could complete a 50% retracement to 1.4680 before new sellers step in. Debt issues in Greece, Spain and Portugal could rear up at anytime which could trigger fresh selling pressure.
