Despite the fact that there is not one single economic release on the G-3 calendar today, the EUR/USD climbed more than 140 points in Asia and early European trade as dollar bearish sentiment intensified throughout the currency market. By 11:00 GMT the EUR/USD pair was trading at a new four month high of 1.2285. As the new year progresses a tectonic shift of mood appears to be taking place in the currency market with traders no longer paying attention to dollar positive interest rate differentials which were the cornerstone of dollar bullishness throughput 2005 and again becoming concerned about runaway US trade and fiscal deficits - a theme that could create extreme dollar bearishness in 2006.

Nowhere is this change of focus more evident than in the latest snippets of Fedspeak. Last week San Francisco Fed President Janet Yellen hinted that the Fed was nearing the end of the rate hike cycle and would become far more "data dependent" in making its future decisions. Today,  New York Federal Reserve Bank President Timothy Geithner noted that ""The plausible outcomes (from massive US deficits) range from the gradual and benign to the more precipitous and damaging."

If, as Ms. Yellen suggests the Fed will begin to be more sensitive to US economic data, the news for dollar longs in the near term may only get worse. Most of the estimates on the US calendar this week are expected to show lower comparisons with periods prior  which could add even more downside pressure to the greenback. Furthermore,  the Housing ATM, that has fueled much of US consumer spending may be finally running out of cash. As we wrote in our weekly piece, "Why do we keep harping about this subject practically every week? Because for all intents and purposes Housing is the US economy these days. It is responsible not only for the vast majority of the nation's wealth creation since 2001 but also its marginal income, as US consumers in the absence of  meaningful wage gains resorted to tapping their home equity loans to the tune of nearly 1 Trillion dollars in 2005. So if housing declines it is very difficult to see how the dollar would not follow. It may happen of course - the FX market can always surprise you - but for now we think this may be the key story to follow as 2006 begins to take shape."

Boris Schlossberg is a Senior Currency Strategist at FXCM.