The USD gained a bit overnight, as the Republican party canceled a vote in the House on Speaker John Boehner’s plan to raise taxes because they did not have enough votes to get the bill passed.
As we approach Christmas, it now appears that there will be no vote until after Christmas and the odds that an agreement is reached before New Years is shrinking by the day.
With traders reversing their “risk off†trades that were entered into earlier in the week, the EUR, AUD, GBP and CAD all moved lower during overnight trading. Adding to the currencies falling was the increased lack of liquidity as we get closer to year end.
It is now looking more and more likely that the US will fall over the fiscal cliff at the end of the year as more than $600 million in automatic tax increases and spending cuts are set to take place on January 1. With the cancellation of the “Plan B†vote, and Congress not due back until after Christmas the impasse continues. Speaker Boehner has basically placed responsibility on President Obama and Senator Reid, stating it is now up to them to come up with legislation to avert the fiscal cliff.
As for the currencies, the EUR has moved lower overnight, as a consolidation move seems in effect after the single currency could not break through the resistance level of 1.3310 earlier this week. Currently trading near the 1,3200 area, support for the EUR is at 1.3180. As we have stated during this week, as liquidity eases, currency swings could be erratic. Expect a bit of pressure on the EUR today as the market hears more and more negative comments on the fiscal cliff negotiations.
Despite the last fews days of selling the Canadian Dollar is still looking good to analysts as technicals and trader positioning are favoring a stronger CAD. With day traders selling their risk off positions, longer term trader are taking advantage and buying the loonie. The RSI indicator on the USD/CAD is in the mid 40’s, which is considered to be neutral, and as long as resistance holds at the .9930 level, the USD/CAD is expected to move lower and test support levels at .9870, the .9820.
That is pretty much the story this morning. This will be the last commentary for the year, unless there is some really important news to report. I would like to thank all of you for your support this year and I hope that these updates and the ones that you have received during the day have helped you handle your currency transactions throughout the year. Our next “update†will be on Wednesday, January 2, 2013, from our brand new home in New York CIty.
So to all celebrating, Merry Christmas, Feliz Navidad, Joyeux Noel and a very happy and healthy New Year.
