Traders witnessed one of the first vital pieces of information from the Euro-Zone which actually put a dent in the plans of the EUR. The German Ifo Business Climate report failed to meet expectations and slightly lowered investor confidence in the 16-nation currency. As a result, traders may indeed see a reversal in the making for the EUR/USD unless today’s news puts a halt to the correction. Sticking close to the calendar today and betting on news releases would be a wise move for the weary trader today as the movements of the forex market are not yet stabilized.
The Dollar rose marginally against the European currency as the economic calendar in the U.S. was blank due to a bank holiday. The knock-on effect of this was a forex market with less volatility than usual. In reality this translated into little fluctuations in the USD and its main crosses.
Many analysts have been worried about the greenback’s rapid deterioration in value in the past several weeks. They are beginning to ask themselves, “Is a reversal in the making?” In Monday’s trading, the EUR/USD rate reached as high as 1.4028. However, the pair ended up lower by 15 pips for the day at 1.3974. Against the Pound, the USD was unchanged at 1.5877. The Dollar gained versus the JPY by 10 pips to close at 94.73.
This behavior shows that in late trading hours, the Dollar reversed some of its losses, and started gaining against the major currencies. This may be due to 2 main factors. Firstly, the Dollar has been over-sold lately, and is under-valued. Secondly, the bank holiday in the U.S. made the forex market more flat than it would have been under normal market conditions. The slightly negative German Ifo Business Climate news release from Germany may have also helped weaken the EUR in late trading. This is compounded with the fact that other major economies are in even more dire straits than the U.S.
Looking ahead to today’s news, the most important economic news release coming out of the U.S. is the CB consumer confidence figures at 14:00 GMT. The release is a top measure of U.S. consumer spending. Therefore, the results are likely to be pivotal in driving the direction of the market both before and after the data release. Traders are advised to take-up positions in the majors, while volatility is still low, in order to make some profits in the USD and its dominant crosses.
