Talking Points

• US Dollar Consolidates in Quiet Asian Trade, Aussie and Loonie Outperform
• New Zealand Dollar Lags Comm Bloc Currencies on Dovish RBNZ Rhetoric
• Italian Bond Auction in Focus Amid Otherwise Lackluster European Calendar

TheUS Dollar (Ticker:USDollar) was little changed in overnight trade against the majors as currency markets digested yesterday’s volatility in the aftermath of theFederal Reserve policy announcement that sent the greenback down 0.55 percent on average versus its leading counterparts, marketing the largest daily drop in a week. The stocks-linkedAustralian and Canadian Dollars narrowly outperformed, bolstered by gains on most Asian bourses. TheNew Zealand Dollar lagged its commodity bloc brethren, stunted by adovish policy statement from the RBNZ.

Looking ahead, the European economic calendar is relatively quiet, with anItalian bond auction amounting to the only bit of noteworthy event risk. Rome will sell up to €5 billion in inflation-linked and zero-coupon 2014 paper, with traders monitoring average yield and bid-to-cover (a measure of demand) readings to gauge the degree of sovereign solvency stress ahead of next week’s EU leaders’ summit. Italian 5-year CDS rates are ticking narrowly higher ahead of the debt sale, hinting a bit of unease about is creeping back into the markets.

Later in the session the spotlight will turn to the US data docket, with December’sUS Durable Goods Orders report expected to rise 2 percent, marking a slowdown from the previous month and underscoring the Fed’s dovish overtures. TheLeading Indicators composite gauge as well asNew Home Sales figures may offer a counterbalance, with narrow improvements expected on both fronts, but Ben Bernanke’s cautionary rhetoric on the economy as a whole and the housing sector in particular are likely to mean the US Dollar will not find any support in a more forgiving fundamental profile, with only another breakout of risk aversion lining up as a possible catalyst for gains.

Asia Session: What Happened

Euro Session: What to Expect

Critical Levels

---Written byIlya Spivak, Currency Strategist forDailyfx.com

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