Another week has passed with dollar still being weak against most of its currencies, with EUR/USD printing 1.4240 and still looking good for more upside moves towards the life time highs at 1.4280.
Last week we had the FOMC minutes which once again didn�t give us a clear insight on the banks plans, however the message that was taken was that FED didn�t want to commit to further cuts anytime soon and that they will monitor all developments before making the final decision. In other circumstances, this news would give dollar a boost but we saw none of that and the dollar still got sold off against the euro. Furthermore, we had retail sales and trade balance which both were positive for the dollar but after the greenback strengthen immediately after the news, the �usual suspects� got in the move and bought the euro both times, leaving the traders confused as to what caused the dollar sell off. We see that as the trend is up and the big players want to see new life time highs in the pair, they use every correction to achieve higher moves.
This week we have very important economic data out of the US and Europe, with CPI data being the main event, together with the housing data. The market will be monitoring closely this news as it is very important to see how the economy is performing after the �big storm� that was caused by the credit crunch. Most analysts warn that the problems in the housing sector are far from over and that obviously still weighs in the dollar. Also we have the TICS data which are forecasted to print higher number that the previous and also the industrial production. All eyes will be on those releases as Bernanke and pals have said that they will make further decisions on policy depending on economic data.
It will be interesting to see the European economic news as well, as we have the ZEW economic sentiment from Euro zone, and CPI as well both which will be watched closely in order to see how the economy is performing with such a strong euro.
Lets not forget that this weekend we have the G7 meeting of Finance ministers in Washington. Market players are getting ready for all developments in that meeting as there are several scenarios that want verbal intervention from members of the banks, regarding currencies. Analysts believe that there will be many subjects that will be covered in that meeting and the recent credit crunch will be definitely high priority on the agenda. Also many believe that officials will comment on the currencies with dollars weakness and euros strength being the targets of comments. However, we believe that the banks will be extra careful in whatever comments they will make as they are the ones who claim that they do not like extreme volatility and action in the FX currencies.
One thing is for sure though, if there is any kind of comments expressing concern over the recent strength of the euro against the dollar or yen, then we can expect a lot of trading action and since it�s the weekend and the markets will be closed, we might open with a gap in the pairs like other times in the past.
Therefore, be ready for trading action this week, wait for the news and if possible avoid open positions after the close of New York on Friday evening, as whatever the outcome of the G7, there will be trading action�