Published: September 24, 2007 6:58 AM
The first London Session of the week has brought indifference, signaled by the modest ranges and subdued volatility. There has been no economic data to focus upon, so market players brought light volume to the ongoing theme of a weak US dollar. The major difference in today�s action has been the following: EURUSD notched a new all-time high at 1.4130. However, just as occurred late last week, we have not seen a convincing follow-through. This is a stark contrast to the previous advances in the pair, which saw strength accompany new highs. In the midst of a today�s market consolidation where the stories are few and the movement is sparse, the �big picture� question should be asked: Is EURUSD running out of steam?
The price action on the London open indicated a potentially active session ahead, but volume quickly fell off and currency pairs settled into tight ranges. The lone story thus far, as mentioned above, has been the fresh high made in EURUSD. Heading into the open at 0200 EDT (0600 GMT), European traders took EURUSD from 1.4100 through the previous peak around 1.4120 was ease. Volume and volatility saw a mild tick higher as the pair ran to 1.4130. Then� it stopped. There was no panic. Trading was orderly. The pair simply ran out of gas, putting in its high a mere 1 minute following the open. For the early part of the session up to this writing, currencies followed the lead of EURUSD, wandering around below-average size ranges as indecision looms over the market. The certainly has not changed, but there is definitely a feeling that we have come very far, very fast.
The spotlight this week may be on US Federal Reserve Board Chairman Ben Bernanke, who speaks today and Thursday, both in Washington. The market will undoubtedly listen for comments regarding additional details behind the -0.50% rate cut. If it was a pre-emptive move on a potentially slowing economy, then the rally in �risk� trades and the weakness in the US dollar may be sustained - - - the story of a relatively healthy economy (sans credit issues) remains the same. However, if it is a response to verified weakness in the economy, then �risk� trades may reverse their recent gains. This would signal that there has been a material change in the US economy.
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