The U.S. Dollar backed off a 3-month high overnight as volume began to dry up ahead of this week’s Christmas holiday. The relatively empty economic calendar along with holiday volume has the potential to create volatile trading conditions.
The March Euro is trading higher overnight. Traders will be monitoring Greece’s deficit problems as well as reassessing the possibility the Fed will begin tightening its monetary policy. Dubai debt issues may resurface today which could be a surprise for traders. Dubai is meeting with creditors to renegotiate credit terms. Look for the Euro to weaken if negotiations fall apart.
The March British Pound is trading weaker. The chart indicates the next potential downside target is 1.5980. Traders are repositioning ahead of tomorrow’s Final Third Quarter GDP report. Economists’ are guessing an upward revision to -0.1% from an earlier guess of -0.3%. This figure will be a positive for the British Pound and indicate that the U.K is getting ready to return to growth during the 4th quarter.
The Dollar is trading slightly better against the Yen overnight. A wider-than-expected Japanese trade surplus helped to limit losses early in the trading session. The Dollar could lose ground this week in limited trading.
The March Swiss Franc is trading higher. Profit-taking and signs that this pair may be oversold is helping to generate overnight upside pressure. End of the year position evening is also contributing to the strength. Don’t be surprised by a short-covering rally back to .9675.
The March Canadian Dollar is getting a boost this morning. This rally began on Friday when the oil market began to strengthen. Today’s Canadian Retail Sales Report could be a market mover.
U.S. equity markets are called higher after a strong turnaround on Friday. The lack of any major economic events and calmer conditions in the market regarding European debt issues is helping to drive up demand for more risky assets. Thin trading conditions means the possibility of violent swings.
Treasury futures are getting hit hard overnight. March Treasury Bonds are in a position to test the pre-FOMC meeting at 117’05. Traders are concerned about the growing U.S. deficit and the possibility of higher interest rates. End of the year reallocations and position evening could also exert a bearish influence on both T-Bonds and T-Notes.
The weaker Dollar is triggering a rally in February Gold. The chart indicates a move to $1131.50 is possible. On the downside, $1107.40 is a key 50% price level. Gann angle support moves up to $1102.00.
March Crude Oil is trading better but inside Friday’s range. Oversold conditions, a weaker Dollar and a stronger stock market could drive this market higher with $77.03 a potential upside target over the short-run.
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