The long awaited G7 came and gone but nothing amazing happened, with the officials being quiet about the recent dollar weakness and euro strength in the world currencies. The only thing that they stressed once again was the need for China to make its currency more flexible and in between words they noted the recent yen weakness.
Market opened with a gap in all yen related pairs and also EUR/USD. The pair closed on Friday at 1.4295 and re opened on Sunday night at new reckord highs 1.4345. The move didn�t find many followers and quickly retraced back to 1.43.
This G7 meeting proved to be a non event, which is why the currencies rebounded at the opening. The lack of comments from officials regarding the recent dollar weakness gave the traders the temporary green light in order to proceed without fear in further bids in the pair.
Furthermore, as the pair is moving to new lows every day, there is more risk to a dollar correction then ever before. However, the next target in everyones mind is 1.45 and clearly the investors will want to at least try and succeed this in the coming weeks�
Today the economic calendar is empty so therefore we might see some consolidation in all currencies ahead of some important economic data later in the week.
This week we have Housing data, with existing and new home sales being the most crucial ones for dollars short term fate. The recent problems in that sector provides a lot of volume when the news are released and therefore if numbers are much lower than already expected we might see further dollar losses. Also, the other news which the market will monitor is durable orders and since its forecasted to print better number, a surprise in the downside will see dollar weakening across the board.
This week we have some news form Euro zone too, as on Wednesday we have the German IFO release which is expected widely to come lower than the previous one. There is a lot of talk regarding euro strength and how it affects the business climate in the Euro zone area and therefore this number will be very important for the euro bulls that are looking for any excuse to buy the European currency at low levels.
Today, the dollar is trying a little to fight back against the euro, with the pair trading below 1.43 at the time of writing, at around 1.4265. Traders clearly wish to correct the large move which happened at market open and also are chasing better levels in order to get in.
Whatever article you come across these days, in any financial newspaper or website, the only thing you will read is EUR/USD on the way to 1.45. All the noise that has been created from the big banks and financial institutions in order to influence people in selling the dollar might prove to be a sign that when everyone starts to think alike, then the big reversal comes�
Do you think that is possible? Well lets wait and see what this week bring us and how the markets will react if more negative US data arrive�
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