The EUR USD started the day weak as traders were convinced the U.S. House of Representatives was going to pass the bill to rescue the U.S. financial system. Additional selling pressure came because of the bailout of Fortis by the Dutch government. The Dollar began to weaken in the early afternoon when it became clear the bill would not pass. Expectations are for the Dollar to fall further on Tuesday as the early word is the bill will not get voted on again until after Wednesday’s Jewish holiday. There is also talk of a possible intervention by Euro nations to prevent wild swings in the market place. Look for strength to continue in the Euro until the rescue plan becomes law. Furthermore, look for the banking crisis to continue to spread across Europe. This may temper losses in the EUR USD. Once the bill is passed the Dollar should strengthen.

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ENERGIES
December Crude Oil is expected to continue to feel downside pressure because of an anticipated global economic slowdown. A slowdown will lead to less demand of energy from factories because production will be decreased. The stronger Dollar is also reducing the crude oil’s appeal as a hedge against inflation. Yesterday’s break may have been overdone so do not be surprised by a light short-covering rally.

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The EUR USD closed down for the fourth straight day as Congress argued the passage of the financial institution bailout package. After an initial surge to the upside on Monday, the EUR USD traded lower most of the week. The rally earlier in the week was a reaction to the possibility that the U.S. budget deficit would not be able to handle an increase of $700 billion. Furthermore global traders had no idea that Congress would take control of the situation as the week progressed despite not passing a bill today. Many traders feel the rally was too much too soon. The four-day sell-off is indicative of confidence that the U.S. will reach some resolution to the financial crisis. If the bill passes as expected this weekend, look for the Dollar to regain its post-crisis strength. The charts indicate lower markets until 1.4900 is taken out. Further weakness could trigger a sell-off into support at 1.4374 to 1.4257.

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