FXstreet.com (San Francisco) - The US Dollar was the winner of
the day: up against the Euro, Pound, Swissy , Canadian and
Australian dollars and posting a marginal 15 pips decline vs the
Two biggest reasons on the back: first, the initial enthusiasm
surrounding the US budget agreement faded. And second, the FOMC
minutes as several members have suggested the idea of cutting QE or
halting it before year-end. At the same time, the majority of
members backed the adoption of numerical thresholds instead of
In the macroeconomic domain, a couple of conflicting reports on
employment failed to boost sentiment. The ADP report showed US
private sector created more jobs than expected in December while
initial jobless claims increased last week.
The US nonfarm payrolls report is the next key event ahead, with
analysts expecting a solid job gain in December. "With evidence
that the US labor market is stabilizing," comments Richard Lee,
FXstreet.com analyst, "major currencies against the greenback could
benefit from a fourth consecutive increase in employment in the
The EUR/USD tests 3-week lows at 1.3050
The Euro has extended its decline against the US Dollar from the
Monday high at 1.3305. On Thursday the EUR/USD lost 1.0% to close
at 1.3050, testing the lowest level since December 13.
Initially, the pair stabilized between 1.3080/1.3100 but the clear
break below the 1.3080 following the FOMC minutes added pressure to
the EUR/USD. On the upside, the cross needs to regain the 1.3140/70
area to ease the short-term bearish pressure.
The RBS' analyst team is short on EUR/USD targeting 1.2650, with a
stop at 1.3310. In a recent report the RBS believes "the divergence
in EUR/USD and our [their] fair value estimate may be related to
both positioning and year-end flows" strategist Brian Kim comments.
By looking at seasonal patterns since 1995, Brian observes that
"EUR tends to be among the stronger performers in December but is
among the worst January performers, while the USD is the second
strongest G10 currency in January..."
Meanwhile, Nick Bennenbroek, Head of Currency Strategy at Wells
Fargo Bank argues that the FX markets are still searching for
direction following the budget agreement. "Our near-term bias is
lower for the euro and the pound, steady for the Japanese yen, and
steady to perhaps slightly stronger for the commodity and emerging
currencies", the analyst said.