Pushing below 1.2800 against the EUR last Friday, the USD has seen some intense ups and downs ever since. In early trading hours Friday, the USD saw some significant gains against its primary European counterpart, but then turned around to lose it all, ending the day at 1.2970. Today, however, the USD appears to be back on the upswing. Starting the trading day with a sharp 50 pip gain against the EUR, the USD appears to be on track to recover the position it was heading for during Friday’s early trading hours.
As confidence in the European markets dwindles, the U.S. Dollar appears more and more to be the safe-haven currency of choice for most investors. Despite the continuing downtrend in important economic sectors, such as housing – which has dropped consecutively for months now – the U.S. economy remains the king which many believe must be saved in order to rescue the entire system. As such, we see large investors bailing out of other currencies and shoring up their positions within the USD regardless of fundamental data.
This week will no doubt see high volatility in USD pairs as the U.S. economy is set to receive one of its busiest news weeks. On top of all of the information regarding Barack Obama’s economic stimulus package being released, we also have a number of significant indicators coming out this week. Of primary importance is the first meeting for the Federal Reserve Board in 2009; they will be discussing the possibility of cutting the Federal Funds Rate even lower than its present target rate.
Moreover, two important pieces of information regarding the U.S. housing sector will be released Monday and Thursday. We also have the Advanced GDP report for the 4th quarter of 2008 coming out this Friday. Forex traders should mark these events in their calendars as they will no doubt generate exceedingly high volatility in the market, especially surrounding USD pairs and crosses.