The fundamental news which will dominate the euro to dollar pair this week will be the employment figures in the US and the problem with Greece in Europe as it was a combination of both these items of news which helped to shift market sentiment towards the US Dollar last month.  Last month’s non farm payroll figures which came in at -11k against a forecast of -119k came as a complete shock to the market and kick started the new dollar positive trend.   This new sentiment towards the dollar was further reinforced by COT data for week ending 15th December which revealed that  the majority of speculators had shifted from being short dollars to long dollars: in other words registering a net Euro short of 16,448 contracts, a sharp reversal from the net Euro long of 51,045 contracts from 6th October – itself the largest Euro long since 8th Jan 2008.

Meanwhile in Europe Greece was giving the ECB a very bad headache when it became clear that the Greek deficit had broken just about every Eurozone rule and may even yet put the entire Euro project in jeopardy and perhaps coming to realise that monetary union cannot work without political union.   The euro to dollar rate is now desperately trying to hold above USD1.43 with only the 40 week moving average offering any sort of protection.  Whether it will hold after tomorrow’s nfp data remains to be seen.

Euro to Dollar Weekly Chart 7 Jan 2010

Euro to Dollar Weekly Chart 7 Jan 2010

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