USD – Market Sentiment Remains Nervous

The USD continued to gain against both the EUR and GBP on Monday in what amounted to a replay in many respects of recent trading sessions. A flight to quality by investors has been the overwhelming decision taken in recent weeks and the intensity of the move must be examined. The USD has been gaining in such a way that some may be tempted to question if this is more an emotional move than a fundamental one. On the other hand, the manner in which the greenback has gained against the EUR has been orderly meaning that its gains have not taken place in a panic mode in many respects. Having said that Wall Street and other equity markets globally continue to show stress and they have steadily declined. The U.S. did release Existing Home Sales yesterday and the number was an improvement over the forecast coming in with a result of 5.77m.

The S&P/CS Composite 20 HPI will be published today and is expecting to show an increase in the value of housing in the bigger U.S. metropolitan areas of 2.5% overall. Also the Richmond Manufacturing Index is on schedule. For investors who have the stamina to look at data – taking into account the degree in which sentiment has driven the broad markets the past few weeks – the next few days should be interesting. Tomorrow Core Durable Goods figures are due and on Thursday the Prelim GDP will come. However, a EUR centric mode is clearly still in effect and this continues to resonate and bring about caution. Traders should also remember that next Monday is a holiday in the States. This means that volume may be lower than normal this Friday as investors escape for a long weekend. More importantly it will cause some to question what positions they will want to hold with the possibility of more surprises being sprung when a majority of the market participants will not return until Tuesday. The USD has been strong and may continue its safe haven trend as long as the broad market noise remains negative.

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