Although the markets haven’t moved all that much overnight, the direction continues to be one which favors the USD, as the Greenback shows gains against all major currencies thus far on the day.
We do not expect to see a normal day of trade on Monday, with the European calendar bare and many traders off the desks for the Presidents’ Day holiday in the US and Family Day holiday in Canada. Nevertheless, risk aversion seems to be at the center of investor minds in light of the latest China reserve requirement tightening, ongoing concerns over Greece and the stability of the EU, and now renewed fears in the Dubai debt markets.
The key focus in Monday’s session will undoubtedly be the commencement of the EU Leaders Summit, as many are anticipating some form of a formal bailout announcement for Greece. ECB President Trichet has recently said that Greece must take all appropriate measures to fix its budget deficit and that scrutiny of its economic indicators must be heightened. Elsewhere, headline preliminary GDP in Japan has come in better than expected, although the data has been played down by the Chief Cabinet Secretary who says that economy remains in a severe state.
Looking ahead, there are no economic releases scheduled for the remainder of the day, with markets seen trading off of broader global macro themes. US equity futures trade with a heavier tone, while commodities are flat.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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