Now that the short-term down trend in force since the beginning of December has been snapped, look for EUR/USD to trade sideways through the Christmas holiday. We could see some more action next week as position adjustment ahead of year-end winds up.
While US yields have not shown a great deal of movement today despite the weak housing data, German yields backed-up quite a bit today, cutting into the dollar’s yield advantage. From just above 50 bp yesterday, the differential is just below 40 bp today, a chunky move.
