The Greenback probably needed a breather last Friday as it paused from its rallies and ended lower against most of its major counterparts except for the Loonie. Did we really see an improvement in risk sentiment or was that just a slight pullback?
It seems that the lack of bad news from the euro zone for the past few days allowed the higher-yielders to have a relief rally before the week came to a close. Another reason for the risk rally we saw last Friday could be profit-taking by traders who covered their short positions before the December holidays.
On the economic front, data from the U.S. came in mixed last Friday as core inflation rose by 0.2% while headline inflation stayed flat in November.
There aren’t any top-tier reports due from the U.S. today but the action will pick up on Tuesday as the building permits and housing starts data are set for release. Stronger than expected figures could fuel risk appetite and cause the Greenback to lose ground again.
Keep in mind that existing home sales and durable goods orders data are the only red flags left on the U.S. calendar for the rest of the week and, with lower liquidity in the markets these days, those reports have the potential to cause huge moves across the charts. Stay on your toes!