The Euro has escalated on risk appetite flows as traders beginning to turn their attention to problem in the United States. The sovereign debt issues are certainly fading out of traders’ minds for the time being. In reaction, the United States Dollar is becoming underperformer during this week. The United States Dollar was further influenced by fiscal concerns. The US government chose to extend “Bush-Era” taxes, in the cost of $900 Billion. Currently, US authorities are throwing “Hail Marries” in order to spur the economy. With tremendous amount of funds going into securing a robust recovery of the economy, traders are becoming weary of inflation risk and possible downgrade of credit ratings. The tide has slowly begun to shift to trouble in the US once again. The following situation would increase US debt by $1 Trillion in 2011, clearly a negative notion for the currency in the long run. Currency tends to lose value whenever the government is running a huge fiscal deficit. Making the situation worse, California Governor and a long time cinema star Arnold Schwarzenegger announced California to be in a state of emergency. California being one of the most desperate and biggest states supports a negative outlook for credit of the country. Leading into 2011, with fiscal and monetary policy running its current course, we might see a substantial weakening in the currency. On economic side, we had seen a rise in German Factory Orders coming in at 1.4%, rising from a contraction of 4% in the previous month. On technical aspect of the picture, we believe that yesterday’s resistance level will continue to hold.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.