Flows and volumes are light but the dollar has a positive bias as Europe squares up ahead of the holidays. those looking for a quick rebound after last week’s frantic EUR/USD rally are admitting defeat and headed for the exits. Support is light until the 1.3820/25 area, the lows posted on Friday as the mini-bubble in the euro burst. A bit of last minute deleveraging seems to be at work as well as oil loses another $1.75. Jitters over the impact of quantitative ease on the dollar remain but expect dealers to wait until early 2009 to put their positions back on.
Should EUR/USD begin to lose significant ground, keep an eye on 1.3633, the 38.2% retracement of the 1.2548/1.4719 rally.
