USD As A Safe Haven

Genuine nervousness remains prevalent in the broad markets as investors have sought safe havens, particularly the USD over the past few trading sessions. The Greenback has sustained its pace and is now squarely among its highest values against a bulwark of currencies. The EUR, GBP, and AUD are all limping forth burdened not only by the financial crisis from the E.U., but concerns that the global economy will continue to slacken demand for physical commodities. China has turned in a rather poor performance in its equity markets as investors have become cautious in what was once deemed the possible savior for the world economy. And if China should not be able to encounter a ‘soft landing’ and instead finds itself stumbling hard the likes of Australia and other countries which rely on the Asian giant as a consumer of raw materials will be affected.

The EUR continues to face the slings and arrows from investors who appear to be pricing in worse case scenarios before the holidays. The question is if and when the Single Currency will get a bounce on some type of optimism. But even short term optimism has been hard to find since the beginning of this week. The lingering fears that the E.U. will not be able to actually solve its debt and banking crisis continues to roil investors who have not been offered any real clarity (except that the E.U. may actually falter further into the abyss). PMI data will come from Germany and France today in the form of Flash Manufacturing and Services readings. Europe as a whole doesn’t seem ready for anything in the way of surprisingly good results pertaining to growth. At this point the EUR must find some backers who believe it has a value that merits these levels. The question is who has long term faith in the EUR and the answer may actually be ‘those who need the EUR to remain a strong currency’, meaning that it is in the interest for the States and Asia to see the EUR remain a stable currency. The EUR may continue to face tests today and tomorrow.

The U.S. will release weekly Unemployment Claims, the Empire State Manufacturing Index, and Industrial Production data today. Wall Street had steep losses on Wednesday proving that the typical Christmas rally is not coming anytime fast. With only two more ‘full days’ of trading on this year’s calendar before volumes start to fall off as investors make for the doors to celebrate, traders should be ready to pounce next week as they find the floors a little less vacated by the standard institutional houses who might be willing to wait until the New Year starts. The USD has found a large backing the past few sessions and this has ramped up talk about safe haven trading. However, it should be pointed out that many questions persist about the American economic situation too. Therefore while the USD enjoys some sunshine it should be noted that it is not because of ‘glowing’ outlooks from the States.

The JPY lost a little more ground to the USD on Wednesday, but it remains in a rather tight range. Traders participating in the JPY must have patience and fortunately the Japanese currency offers that possibility as volatility is not exactly a daily occurrence within its Forex market.

Market conditions remain on a razor’s edge. Investors remain skeptical about the E.U. capabilities to deal with their financial crisis in a unified manner. The fear of contagion seeping into the global economy has set off a domino effect and traders have plenty of opportunities to take advantage of trends providing they effectively manage their risks.