2010 is beginning very much the way 2009 drew to an end. Traders are weighing the juxtaposition of a rapidly growing Asian economy versus slower growing western economies which prompts risk assumption and movement into commodity currencies and emerging markets versus the rapid back-up in US interest rates and signs that the US economy may be on the cusp of adding jobs to the employment roles for the first time in nearly 2-years.
Range-tops at 1.4440/60 are key in the near-term while the 200-day moving average at 1.4230 is providing solid support. Which side wins is any one’s guess near-term but one shift looks to be structural: Higher rates from the US appear to be here to stay, no matter what the Fed does in the near-term. That is a very significant shift over the last month that should keep a major USD collapse off the cards even if the risk trade reasserts itself to begin the new year.