Currency Pair Overview Dollar Rises As Trade Desks Look For Safety

Overall, the market moved towards the safety of the dollar in the European session. A similar move was tried in the Asian session, however, the volume was too light to be able to sustain any important breakouts. The market was led lower by the euro, which is more likely a victim of collateral damage right now. First, the Israeli incursion into the Gaza strip made trade desks sell risky assets, and at the same time threatens oil supplies. Secondly, the euro, and thus the whole currency market, was hit by bearish comments from ECB members, even though earlier, Mr. Trichet said the bank might be done with rate cuts. 

The Euro (EUR/USD) led the majors lower against the dollar. The euro fell a very strong number of pips in the European session, even though earlier it managed to post some small gains. The pair fell 250 pips in less than 30 minutes, touching the 20-day moving average.

The Sentix reading improved for the first time in the last six months in January. The index rose 10.5 points from December, to -34.4, the biggest monthly gain since August 2005. The Euro-zone's better assessment is in-line with other important regions. Both the Japanese and U.S. indexes have improved in January, suggesting that investors are starting to see the business mood improving.

The Pound (GBP/USD) fell 100 pips since the Sunday session started, even though it traded in the positive area for a very short period of time during the European session. The pound is currently trading near the lowest value in the last six years, as the BoE is expected to reduce the monetary stance close to 0%.

The construction PMI plunged in December to a new record low, of 29.3 compared with analyst expectations of 30.5. The released number denotes the very weak period the U.K. housing and construction market is enduring, showing the sector contracted for a tenth consecutive month. The contraction was wide-spread spanning the employment situation to new orders, having practically every sub-index pointing to a severe slowdown.

The Aussie (AUD/USD) fell 60 pips in the European session, even though it came within a few pips of reaching the highest point since October. In order to break anywhere higher, the aussie will need the help of the entire market, selling the dollar index much lower.

The Cad (USD/CAD) traded between the 1.2050 support area and the 1.2150 level during the Asian session, and now the cad is trying to break above the TheLFB R1 (1.2195). The pair continues to trade within the same range as in the last few weeks, unable to break decisively in either direction.

The Swissy (USD/CHF) broke above the 200-day moving average. The pair fell 110 pips in the Asian session, but surged much higher during the European trading hours. Earlier, the swissy made a double-bottom at the 1.0400 support area, suggesting the downtrend might be over in the medium term.

The Purchasing Managers Index shows the industrial sector contracted in Switzerland for the fourth consecutive month. The PMI number was released at 36.9, versus analyst’s estimates of 35.2. The Swiss PMI confirms that the economy is taking a similar path as the Euro-area and the U.S. economies, which are near the recession level. The index sits at multi-year lows, showing that inflationary pressures dry up very fast.

The Yen (Usd/Yen) traded in a tight channel in the Asian market, slightly lower than the Asian opening price. However, the pair surged in the European trading hours, gaining 80 pips. For now, the yen is trading near the highest value reached in the last month, as a number of Japanese officials complained about the yen's strength.