The trend toward a lower dollar cannot be ignored this week. The EURUSD ended last week at 1.4303. Today is is pushing 1.4600. The GBPUSD closed at 1.6396. Today the close is pushing 1.6685. USDJPY has moved from 93.00 to 90.50 today. Finally, the USDCHF went from 1.0603 to 1.0365.
The moves came during the 1st week after the traditional end to the 2009 summer. The catalyst for the selling seems to be a concern about US debt. President Obama went before a joint session of Congress and the American people touting his health reform plan. Wall Street seems to be concerned about the costs and this may have contributed to the selling.
Bond yields fell in spite of additional treasury auctions. Commodites moved higher with the CRB rising from 247 to 254.50 over the course of the week. Gold led the way as it moved above the $1000 price barrier. Talk of China diversifying holdings into Gold and out of the dollar was the catalyst.
Finally, I can’t help but conclude the charts helped contributed to the move. EURUSD moved through the 2009 high at 1.4447. The GBPUSD moved through important resistance at 1.6589. The USDCHF fell through 2009 lows at 1.0531, USDJPY fell through the summer low of 91.72 and the AUDUSD and NZDUSD moved to 2009 highs as well. No stones were left unturned from a chartest standpoint and to have it start the 1st week of the last 1/4 of the year, after a non-trend period, helps the bearish picture.
Next week, besides the usually Fed speaking schedule from the likes of Bernanke, Lacker and Yellen, the US will announce
- Retail Sales on Tuesday, CPI and Capacity Utilization on Wednesday, Housing Starts and Building Permits on Thursday.
- The UK, Eurozone and Canada will also announce their CPI figures on Tuesday, Wednesdayand Thursday respectively.
- New Zealand will release Retail Sales on Sunday night. They also will also release their manufacturing index on Wednesday evening.
- The SNB will release their Monetary Policy Assessment on Thursday. Before that, Retail Sales will be announced on Wednesday.
- Japan wil release the Tertiary Industry Activity on Wednesday evening and release their Monetary Policy Statement on Wednesday as well.
Although economic data is important, the market is likely to continue to follow the flows which means following the price movements. This week the trend was for a lower dollar. Will the trend continue next week? Until the charts say otherwise, it is always to remember the old adage, “The trend is your friend”. As we head into the weekend, it is not time to break off that friendship.
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Have a great and healthy weekend.
Greg Michalowski
