Euro Can't Maintain Bounce in Forex Trading

Earlier, it looked as though the euro might be able to find solid support at 1.50. After pulling back on U.S. dollar strength, it looked as though a euro bounce would turn into something more substantial. Alas, with news out of the U.S., that hope is fading as the greenback gains in currency trading.

GFT's Boris Schlossberg reports in FX360 on some of the challenges facing the euro in forex trading:

Still, the positive IFO news was somewhat offset by the announcement from GM that it intends to cut 9,000 jobs from its Opel subsidiary. As we wrote earlier, “Employment stabilization continues to be the key to further EZ growth in 2010. The region has been able to avoid the draconian job cuts seen in the US, by utilizing a variety of job-mitigation and fiscal stimulus schemes, but analysts worry that any slowdown in demand in H1 of 2010 will precipitate another round of layoffs which would snuff out the nascent recovery.”

This morning, somewhat disappointing news about the economy in the U.S. is driving stocks lower just after the open. Things aren't as rosy as hoped, and that means that investors are, once again, turning to the U.S. dollar as a safe haven as the high beta currencies once again struggle for purchase in forex trading.

Initial Unemployment Claims Fall Dramatically

This week the initial unemployment claims appear to have dropped rather dramatically. Instead of dropping to 501,000 initial unemployment claims, the current number is down to 466,000. The four-week moving average was also below 500,000.

This report coincided with a report from the Federal Reserve that shows an increasingly optimistic forecast for the economy. The report also indicates that stability could be coming to the jobs market. While the situation still shows weakness, the pace of job loss has slowed, and things are not as bad as they were at the beginning of the year.

U.S. Dollar Rallies on Dubai Debacle

The U.S. dollar is rallying right now in currency trading on the FX market as the news out of Dubai sends all thoughts of risk out the heads of investors. Investors had been hoping for a good day today on Wall Street, but optimism over the biggest shopping day of the year, Black Friday, has been completely overshadowed by the Dubai debt crisis.

Dubai World Conglomerate plans to ask its creditors to allow it to stop making payments for six months while it restructures. This news is a huge blow, since Dubai has represented a great deal of global economic activity. This is an especially hard blow for emerging markets.

As a result, the greenback in surging in forex trading as investors look for a safe haven. Forex traders are in no mood for risk today, and are showing it. The risk trade has been completely abandoned for now, as traders look for capital preservation in the safety of the world's most stable and reliable currency.

The dollar's strength also has commodities falling, as downward pressure is applied to oil and gold, both of which often move inversely to the greenback in forex trading. It will be an interesting day today, and it remains to be seen whether the weekend, with its closing of the markets, will give forex traders a chance to evaluate their response, and see whether the U.S. dollar is able to maintain gains in currency trading next week.