Over the past 24 hours the dollar has come off of its lows versus the euro and the pound. Does this signal the beginning of a larger move in the greenback or simply traders closing out profitable short dollar trades?
During the previous week the euro has put in a solid performance versus the dollar, adding almost 3 cents to the value of the EUR/USD when it rose to a new year high of 1.4035. The Swiss franc has had a similar performance with the USD/CHF falling to 0.9200 from 0.9500, a new low for the year before moving pushing higher.
Could it be that the market is finally beginning to digest yesterday's news of Moody's slashing the sovereign credit rating of Greece and a dollar rally is occurring? Perhaps bearish speculative positions in the dollar are unraveling which is leading to a reversal?
While there are inter-market forces that are currently influencing the markets (Greek CDS spreads have ballooned as have the spreads on 10-year German/Portuguese debt), most likely today's appreciating dollar is a case of technical selling with a bit of profit taking mixed in. This pullback in the value of the euro and a strengthening of the dollar may be a temporary move in the rally of the euro with the dollar still being sold long term.
At the opening of New York trading the EUR/USD was trading at 1.3900, a level that coincides with ECB President Jean-Claude Trichet's hawkish comments from last week. Resistance appears to be found at the 1.3860 level at the February high.
In the Cable, the dollar rally may extend a bit further. Currently the GBP/USD is trading on its daily low at 1.6140 but a lack of support may push the pair lower towards 1.6080, a level that coincides with the rising trend line from the February low.
So the future of currency trading seems to show fluctuations, and a loss of stability, considering the middle eastern uprising and turmoil. The USD GBP EUR and some other main currency exachange markets will show an instability. You can stay tuned for more live updates with forexyard twitter.