Fundamental:
With Standard & Poor’s downgraded the sovereign credit ratings of major 9 Euro Zone countries, in effect sent the Euro further down towards the closing market last Friday. Although, with the limited time left; with Monday being a Martin Luther King holiday, some traders had been pricing in such a possibility.
But a spill over for this short trading week would accelerate trading volatility, as expected for the third trading week of January. The credit rating's downgrade have coincide with our market outlook where the USDX rally would continue its advance. This would be the fuel to trigger this expected rally.
The net effect of negative stocks in the Asian markets have been seen today that may well seen over in the European market. But European leaders have been quick on their responsive statements addressing the structural reform needed to stabilize the crisis including a call to create a European credit rating agencies independent from the US. How this Tug of war have continued has not helped the market one bit. On the brighter side, investors shifting to a more flight to quality investments for the USD have been more favorable now compared from a few months back.
In a recent release by the US Commodity Futures Trading Commission (CFTC)showed that net Non-Commercial futures traders—typically large speculators—were the most net-short Euro against the US Dollar.A clear slow buildup of volumes and open interest for US Dollar bulls will be increasing with wide spread European investors hedging their portfolio and shifting cash flow investments from EURO/Gold denominated assets.
Technical:
The US Dollar largely expected to gain further with the USDX touching a new 81.60 basis pt. high will have to accelerate once the US financial futures open with Globex and ICE leading the initial trading after the MLK holiday. The next target objective for the USDX is at the 82.05/10 which could be achieve within the opening week. Trading activity on Tuesday-Wednesday trading session would be dictated by the US Dollar taking the lead with trading volumes in Asia and the European markets.....
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