Last weekwe saw the dollar taking a hit from most currencies and the EUR/USD breaking apsychologically important level of 1.35. With few pieces of economic datacoming out of the US,the only event worth seeing was the FOMC minutes, PPI and Trade Balance. Allthese events were better than expected with FOMC minutes being on the hawkishside.

The PPIheadline number was bit higher although its core number was unchanged, and theTrade Balance was lower for the second time in a row beating the forecasts thatexpected it much wider above 60. All these events were not seen by the marketas good news for the dollar and therefore the greenback continued its slide allacross the board with Euro the main winner of the week.

We also hadthe G7 meeting this weekend, which traders were watching closely for anymention of the weakness of yen and strength of euro. However nobody said a wordabout yen or euro so Monday saw an uptake on all curry trades with EUR/JPYhitting new life time highs of 162.40 and EUR/USD getting dragged up towards1.36. The market seems to be waiting for an excuse to push the Euro higher, andthe lack of worry from European and Japanese officials gives them the greenlight to do this.

As we saidlast week, it was very important for EUR/USD to break the 1.35 level for anyupside strength towards the 2004 1.3660 target. The pair was within tightranges for most of the week as there was not enough news to support big moves,however it managed to not only break 1.35 but closed the week at 1.3530, itsdaily high.

Whathappens this week though? Will EUR/USD sustain its gains and push for morestrength towards life time highs? Or will it find enough selling pressure tostart the correction process which is widely expected?  Only data and time will tell.

This weekscalendar is looking busier, starting with US Retail Sales, TICS, EmpireManufacturing, CPI, Housing Starts, Industrial Production and last but notleast the Philadelphia Index. There is also quite a bit of data coming out of theEurozone too, so get ready for a busy trading week with the possibility of bigvolatility.

It isimperative for the Dollar bulls to see some good news for the US currency this week, as they need to berelieved from the pressure that seems to have been built up recently, mainlyfrom the USeconomic slowdown and the trade relationship with China.

The marketwill be looking to see better numbers on Retail Sales in order to go back tobuying the dollar, as a better number will give confidence that at leastconsumer sector is not suffering too much. Another thing to watch is the CPIcore number, which could print higher this time after Fed officials all statedthat inflation risks are still there and if they see proof they will act onit.

With manycurrency pairs still at life time highs and EUR/USD doing a great job ingetting close to printing one, watch out for any correction which is awaited bymany traders. It will also be interesting to see the high levels of EUR/JPY orEUR/USD, how will officials react and if there will be any kind of verbalintervention in order to prevent further upward pressure.

 So, getready for what seems like an exciting week with lots of data and many promisingtrading pairs.