Monday, 20 Dec 2010

Forex Market Flat, Appears Unstable from Global Tensions

The failure of European leaders to find agreement about expanding the current bailout fund has begun to weigh a bit on the euro. The EUR/CHF has reached a record low of 1.27 this morning before retracing upwards slightly after market tensions in Korea eased somewhat.

The growing military tensions on the Korean peninsula had traders concerned about a possible sell-off in higher yielding currencies this morning. However, North Korea's refusal to respond to the South's artillery drill helped ease some of the pressure. The USD and CHF found some support from the build-up due to their safe-haven status, but appear to be easing lower now that the immediate crisis appears averted.

Debt concerns persist in Europe and the big news for the euro zone is indeed the lack of action at last week's EU Summit to expand the current bailout. On the other hand, any bearish pressure appears offset by the EU's agreement to create a permanent bailout mechanism by 2013.

With little market news affecting prices today, the market appears calm, with minor jitters from the ongoing tensions arising in certain regions. The tension helps currencies like the USD and CHF, but the mild intensity of the tension appears to offset any gains. Traders should anticipate some flat trading behavior ahead of this weekend's Christmas vacation, as a result.