USD Marches On

The EUR broke down towards new lows on Tuesday as investors continue to be nervous about the E.U. financial crisis. The saga has no end from Europe and going into the holiday season investors have found little cheer. The E.U. has not been able to overcome a lack of confidence which in fact seems to be building and because of it the EUR continues to lose value. Further bond sales will come from Italy today and its yields continue to be under pressure. While the German ZEW Economic Sentiment marks yesterday were a little better than expected they were nothing to ignite a parade. The Federal Reserve released their FOMC Statement late yesterday, but the Fed clearly tried to take a quiet approach. While the Fed said the U.S. economy saw moderate growth, there was no hiding their concern about the E.U. crisis. During the press conference held by Ben Bernanke he reiterated in subtle words the need for lending and spending to improve, but he was not able to sidestep the high unemployment in the States, the near deflationary indicators, and – yes – the E.U liquidity problems.

The EUR finds itself at low water marks against the USD and it was not able to sustain support levels. Investors may continue to find that the EUR faces pressure if the E.U. is unable to offer ratings institutions anything better than they have already attempted. Sovereign debt yields from the E.U. face challenges and the overhang from another possible downgrade from rating agencies such as the S&P have created a perverse storm. European bourses are struggling to achieve gains also. The EUR must be watched carefully. A short term contrarian trader could be tempted to pursue a EUR bounce, but the midterm outlook for the Single Currency remains rather dim.

There will be no major data from the U.S. today. The USD has found a niche as a safe haven vehicle for investors who are seeking to preserve capital. Wall Street has turned cautious the past two trading sessions, brushing aside aspirations for a Christmas rally. The Fed’s policy statement yesterday will bring little in the way of impetus. Although the Fed is trying desperately to make money readily available and painful to hold (via low interest rates), investors have not been able to find the stomach to put their money into equities even though they appear relatively cheap. Physical commodity prices remain rather flat. Crude Oil has done rather well, but that is likely because of political tensions. Gold is approaching low water marks as the USD has gained. The precious metal is around 1640.00 USD as of this morning.

The U.K. will release employment data today. However the GBP remains clearly under the auspice of a EUR centric mode and this is not going to change quickly. However a EUR/GBP trade could prove interesting for those with a taste for adventure. The GBP has been trading lower, but has not done so as quickly as the EUR. The AUD has weathered the storm a bit better than the EUR also, creating another opportunity if traders were to choose the Australian currency over the EUR.

The JPY lost a little bit of value and if you happen to believe in its all consuming range trade dance that means the JPY will likely get stronger over the next couple of trading sessions at some point.

Forex and the broad markets remain skittish. The lack of clarity from officials and continuing developments regarding European banks under strain have done little in the way of favors. The EUR/USD must continue to be monitored.