Consolidation was the name of the game for the New York session. Many traders decided to take the day off and make it a long 4 day weekend. The traders who did show up were recovering from their food comas that were induced yesterday. The European session saw the dollar recoup most of its losses from the Asian session. The New York traders sustained those gains but kept the dollar within relatively tight ranges as most pairs were in consolidation phase. While the dollar did turn up from extreme levels, the overall picture is not pretty for the greenback. Consolidation at lower levels could indicate that the markets are just gearing up for another move lower. Next week could be a big decision time for the markets as to which way the dollar goes from here.
Next week the U.S. data calendar is jam packed. We will be getting readings on housing data, consumer confidence, GDP and inflation. The market is sure to keep a close eye on every bit of U.S. data due out next week. This is due to what the Fed said in the release of their Oct. 31st minutes this past week. They mentioned that the risks to growth are outweighing inflation risks. They also said the last interest rate decision was a close call and that further interest rate moves will be data dependent. These statements will have the market looking for any bit of information for direction of interest rates and therefore direction for the dollar. Should any of next week's releases come out off target the markets will be worked into frenzy. If the data should come out and be USD positive we could see some serious short covering as the markets have built up large short USD positions. Even though we are heading into year end it will be no time to fall asleep at the switch. Traders that are not focused and prepared for next week's events could find themselves stuck at the start line while the rest of the market is nearing the finish line.
