The USD continues to trade between 1.2500-1.2800 against the EUR, and the pair seems to be moving without direction in anticipation of the next big event to hit the news. As long as the 1.3000 level stays untouched, there is a good chance that the pair may move lower again in the coming days. Risk aversion continues to give the Dollar strength and that is likely to continue until we see signs of stabilization.
The Dollar has rallied recently as global economic outlook has worsened, with investors pulling money out of commodities, stocks and high-yield currencies and parking it in safe-haven assets such as U.S. Treasuries. According to Treasury data released yesterday, foreigners bought $143.4 billion of U.S. securities in September, the largest net inflow since early 2006. Testifying before Congress yesterday, Federal Reserve Chairman Ben Bernanke said massive demand for the USD means it remains unrivaled as the world’s reserve currency. In conclusion, two factors have joined together to strongly support the USD. The first was the poor Euro-Zone data, which is continuing to prove that the most sustained global concerns are now coming from the European nations. The second factor is what is known as the “herd effect.” The current USD bullish trend appears to be so enduring that investors are seeing potential for unlimited profits and are so anxious to join the feast that they are becoming almost oblivious to the economic indicators. In this turn of events, only a major combination of unfortunate data from the U.S., along with a series of positive signals from the Euro-Zone, could initiate a long-lasting reversal for the EUR/USD pair.
As for today, a batch of data is expected from the U.S. economy. These figures are expected to set the tone for the USD’s pairs and crosses. Special attention should be given to the U.S. Building Permits which is expected to fall to 0.77M. Traders pay close attention to this figure as it has a strong correlation with the value of the U.S. Dollar. Also today, the Core CPI is scheduled which should also have an impact on the market because if it delivers unfavorable figures, it will validate a problematic U.S. market, and the USD is likely to weaken as a result.
