The euro climbed to 1.3465 resistance area, before retreating, against the dollar today after Germany’s ZEW economic sentiment indicator rose to its highest level in six months reaching 15.4 (forecast was for 6.8) in January from 4.3 the previous month. 

With the U.S. equity and bond markets closed for trading, it has been an exceptionally quiet day in the foreign exchange market. Any volatility was limited to the European trading session, where the dollar sold off aggressively against many of the major currencies. Between 8am and 4pm NY time, there was virtually no movement in the foreign exchange market. 

EUR/USD was markedly weaker  falling through the 1.3300 level on the first trading day of the week as a steep drop in  the Shanghai index and disappointment over Germany’s reluctance to add more capital to the EFSF fund prompted heavy selling in the pair unwinding a significant part of last week’s gains. Ahead  of the EcoFin meeting scheduled for today and tomorrow, German Finance Minister Wolfgang Schäuble said that Berlin does not support increasing the size of the euro zone rescue fund, noting that last week’s  reports that the EU is planning such a move were a “misunderstanding”.

What the U.S. economy needs the most right now is jobs. It is the missing ingredient in the U.S. recovery that has frustrated Federal Reserve officials the most and explains why the dollar fell sharply following this morning's U.S. economic reports. 

Earnings season had a decent start last night with the AA earnings beating estimates. While the stock was down today on valuation concerns, the good report kept the tone positive in the overall market. Trading was rather quiet for a second day. 

Risk FX rallied ahead of the Portuguese auction due at 10:40 GMT today with EUR/USD breaking above the 1.3000 barrier in early morning European trade as  sentiment in the credit markets improved slightly. Irish,