NEWS / Foreign Exchange

Will Payroll Data Save the Dollar from Further Losses?

What a weekthis has been, with some important indicators coming out of US and on top ofthat, some geopolitical news commanding a lot of attention. When the weekstarted we saw a lot of dollar weakness due to worse than expected Housing Data,a trend that continued with lower Durable Goods numbers and the EUR/USDhovering around 1.3350.

The otherbig event of the week was Bernanke??™s testimony in front of the Joint Economic Committee,an event closely watched by the market for any indication that the economy isslowing and a rate cut will follow sooner than later. However, althoughBernanke was aware of problems in the Housing Market mainly due to sub primemortgage problems, he once again surprised markets by saying that the Fed ismore concern about inflation risks to the upside rather than anything else.

With thetraders being caught unawares by his hawkishness, the dollar was bid all acrossthe board, with the EUR/USD breaking 1.33 and moving towards new weekly lows of1.3285.  This figure found tremendoussupport and it could not break it to the downside.

As the weekwas ending, more good news came out of the US with the GDP surprising most byprinting a better number, and then Chicago Purchasing Manager printing a muchbetter than expected headline number too. This was mainly due to new orders coming in.

Once the marketbroke down the number and analysed every bit of it, it was obvious that inaddition to ???prices paid??™, the Employment numbers were lower too.  In fact, overall, the number was more troublethan originally thought. So once again traders could not commit to buy thedollar and therefore any potential move was muted.

The weeksbig action came not from data though, but from the US Department of Commerce??™s statementwhich announced imposed trade sanctions on China??™s paper imports; a move thatwas clearly seen as a tougher approach on China by the market.

After thisannouncement, the dollar sold across the board, with traders worrying that moretariffs could be imposed, and therefore more instability, could occur betweenUS and Chinaon the matter of the revaluation of their currency. This shows that the US cannot wait any longer for China to act on their currency andthey are taking some action.

News waswelcomed with a big move in all currency pairs with EUR/USD climbing up 100pips in just a few minutes, towards 1.34, which due to profit taking and thelast day of the month, it closed at 1.3350 for the week.

With theEaster Holidays just around the corner we might see a lot of trading volumethis week, as Non Farm Payroll Data come out this Friday.  Dollar bulls are waiting for this news withgreat anticipation, as they are hoping the number will be strong enough toboost the dollar and give it its long awaited chance to break higher.

However,this week we also have other economic data from the US such as the ISM Manufacturing, avery important indicator for signs of further slowing in the ManufacturingSector, and ISM Non-Manufacturing data later on. Both of these indicators arecurrently above the psychological level of 50, so if we see any numbers lowerthan that we could see the dollar weaken all across the board.

Mostimportant though, is the NFP, and with analysts forecasting a slightly betternumber this week, we need to see how the Employment Sector is performing. Anysurprises on the downside will again give more excuses for traders to sell thegreenback and take EUR/USD a step closer to 1.35.

Also thisweek watch out for RBA rate decision which although expected to remainunchanged, there is a lot of speculation at the moment that the Bank ofAustralia will raise its rates due to a string of better economic data in therecent months. Don??™t forget that AUD/USD is at 10 year highs at 0.8160 andtherefore a hike could trigger the pair to make tracks towards 0.85.

As well asRBA rate decision, we have the BOEs rate decision on Thursday, which again isexpected to remain unchanged.  Howeverthere is a lot of speculation that the Bank will hike again, with manybelieving that this will happen on May, with others speculating that it may happensooner than that.

So, as youcan see there are enough events to keep us interested for the week and many opportunitiesfor trading action in most currency pairs. The main things to watch for are theEUR/USD approaching psychological level of 1.35, GBP/USD trying to have anothergo at psychological level of 2.00, and AUD/USD threatening to move even higher.These pairs could give us good selling opportunities as they all seemingly haveone common goal: the top.<p>

Enjoy yourweek, and have a lovely Easter Holiday.