EUR/USD snored through most of the European session today with worse than expected EU eco data having no impact on holiday-thinned order flows. French Business Confidence printed at 102 versus expectations of a rise to 104 and French Production Outlook indicator slipped to -2 suggesting that growth in the region's 2nd largest economy will remain sub par in Q4 dragging  down the performance for the overall block in the process. Additionally EU Current Account data widened to -9 Billion gap from  -4.5 Billion the month prior. The market however shrugged off the news, with EUR/USD trading virtually unchanged at 1.1880 as most dealers thoughts turned to the slopes of Vail and Gstaad. Trading is expected to be listless through most of next week and we along with most of the FX world will be gone until after New Years.

The latest strength in EUR/USD has led some analysts to speculate that the dollar bull move of 2005 may be over. The key focus of the markets in 2006 they argue will be the massive structural imbalances of the US Trade and Budget deficits, especially if the Fed stops the rate hikes at 4.5%. That position makes eminent sense, but it rests on the big assumption that the Fed will halt after January meeting. With US growth still recording impressive pace of 4.1% growth it is by no means a certainty that the Fed will loosen the reins. We believe housing remains key to Fed's future actions. The Fed will not really cease tightening until housing shows a marked slowdown. To that end, today' s New Home Sales figures may deserve more attention than that second tier release usually receives. If the data shows serious deceleration as market expects,  the trading thesis of the dollar bears will be reaffirmed. However, if the indomitable housing market surprises yet again to the upside, talk of a dollar demise could be premature and could lead to new lows for the EUR/USD as we enter 2006.

Boris Schlossberg is a Senior Currency Strategist at FXCM.