Day after day we see heavy dollar buying at the 16:00 GMT fixing. The fixings are dominated by asset managers, some of whom need to deal on a published rate for fiduciary reasons. Clearly, these accounts have been hedging currency exposure at a minimum and liquidating overseas holdings at the maximum.
In thin, year-end markets, their dealings are difficult for the market to absorb without a big mark-down in prices. Yesterday we saw little bounce-back after the wave of fixing-related sales dried up. Markets are even thinner today, so it will be interesting to see if we can stage any sort of a bounce.
Spec accounts have gotten themselves quite short in recent sessions so it would stand to reason that there are some “natural” buyers on weakness these days, but the flows seem still to be overwhelmingly bearish for EUR/USD. Keep an eye on the 1.4175/90 area. I think we could find some support there. We trade now at 1.4230 from 1.4220 lows. 1.4260 is now resistance on rebounds. If a nervous short, place a stop 10-15 pips above that level.
