Searching for footing.

The US Dollar struggled today to find its footing in the marketplace. While the Dollar posted a sound 100-point gain against the Japanese Yen, other pairs were left in stagnating ranges. The EUR/USD stalled out at 1.3190 before pushing to a high of 1.3244 – one of the bigger moves on the day. With relatively little news for the day, most market participants honed in on the Current Account numbers out of the US. According to the government’s number, the deficit shrank from $229.4 billion to $195.8 billion in the three months through September 2006, which is the slightest shortfall since the third quarter of 2005. In addition, traders and analysts took a look at Export prices. Though not a market-moving release, export and import prices are a useful indication of inflation pressures created by changes in foreign exchange rates. For example, when the Dollar is strong, import prices tend to be under downward pressure. If an item in Japan costs 800 Yen and the exchange rate is 117 yen to the Dollar, the US Dollar amount is $6.84. If the US Dollar then strengthens to Y140, the US Dollar amount will fall to $5.71. Because US exports must compete with foreign goods, there is also downward pressure on export prices when the Dollar is strong. Last but not least, volatility returned to GBP/USD when a 35-point consolidation band above 1.9220 turned into a 150-point rally to 1.9370. David Hilgeman, XPRESSTRADE Analyst