Despite falling last week on the heels of a poor jobs report—United States unemployment rose to 9.6% and nonfarm payrolls did not rise as highly as forecasted—the U.S. dollar began to firm up against both the euro and the yen. Federal Reserve Bank Chairman Ben Bernanke announced in an interview on 60 Minutes that the latest quantitative easing project might go beyond the original $600 billion projection. These factors suggest, then, that even with this short-term gain, the U.S. dollar will continue to weaken, thus creating uncertainty and skittishness on the part of traders as the market finds its way. Long-term positions, then, could be favorable for those trading against the dollar, though this will be a tough bet.
As euro zone finance ministers struggled to protect the euro from the U.S. dollar, Japanese exporters had begun to sell the euro so that they could buy the yen while it remained above 111.000. This happened after the U.S. dollar gained on the yen to reach 82.85 yen over 82.58 yen last week. Likewise, the euro fell on the morning of the 6th of December to 1.3363 U.S. dollars, a slight drop from 1.341 of last week. Only time will tell how these pairs will shift throughout the week, given the upcoming talks regarding Ireland’s aid package woes, as well as whether or not the European Union will revamp its budget rules.
So what is the sensible move for early December? Although it’s a bit stingy right now, the market could favor the euro after the Irish budget passes and the European Union’s aid package goes through for Ireland, though euro investor confidence will slow after that, based on the recent Sentix report that dropped noticeably after a nice rise in November.
This drop in the confidence index could push EUR/USD to a short-term resistance around last Friday’s high of 1.3438 or thereabouts, in which case traders might consider selling for a tidy turn around if they can afford it. The recent sharp downturn happened quickly, however, so there’s the possibility that corrections might occur in the next few days, so adjust your stop-loss accordingly so you don’t get caught out in the open and unprepared.
Those of you following the EUR/USD trends, the job situation in the United States, and Bernanke’s quantitative easement plan might consider going on to further do some in-depth research on this matter. Either way, it’s definitely an interesting time for the U.S. dollar, the euro, and the yen, which will make for some exciting trading these next few months.