NEWS / Foreign Exchange

Week Starts With Dollar And Yen Strength. . .

The longawaited G7 came and gone but nothing amazing happened, with the officials beingquiet about the recent dollar weakness and euro strength in the worldcurrencies. The only thing that they stressed once again was the need for Chinato make its currency more flexible and in between words they noted the recentyen weakness.

Marketopened with a gap in all yen related pairs and also EUR/USD. The pair closed onFriday at 1.4295 and re opened on Sunday night at new reckord highs 1.4345. Themove didn??™t find many followers and quickly retraced back to 1.43.

This G7meeting proved to be a non event, which is why the currencies rebounded at theopening. The lack of comments from officials regarding the recent dollarweakness gave the traders the temporary green light in order to proceed withoutfear in further bids in the pair.

Furthermore,as the pair is moving to new lows every day, there is more risk to a dollarcorrection then ever before. However, the next target in everyones mind is 1.45and clearly the investors will want to at least try and succeed this in thecoming weeks??¦

Today theeconomic calendar is empty so therefore we might see some consolidation in allcurrencies ahead of some important economic data later in the week.

This weekwe have Housing data, with existing and new home sales being the most crucialones for dollars short term fate. The recent problems in that sector provides alot of volume when the news are released and therefore if numbers are muchlower than already expected we might see further dollar losses. Also, the othernews which the market will monitor is durable orders and since its forecastedto print better number, a surprise in the downside will see dollar weakeningacross the board.

 This weekwe have some news form Euro zone too, as on Wednesday we have the German IFOrelease which is expected widely to come lower than the previous one. There isa lot of talk regarding euro strength and how it affects the business climatein the Euro zone area and therefore this number will be very important for theeuro bulls that are looking for any excuse to buy the European currency at lowlevels.

Today, thedollar is trying a little to fight back against the euro, with the pair tradingbelow 1.43 at the time of writing, at around 1.4265. Traders clearly wish tocorrect the large move which happened at market open and also are chasingbetter levels in order to get in.

Whateverarticle you come across these days, in any financial newspaper or website, theonly thing you will read is EUR/USD on the way to 1.45. All the noise that hasbeen created from the big banks and financial institutions in order toinfluence people in selling the dollar might prove to be a sign that wheneveryone starts to think alike, then the big reversal comes??¦

Do youthink that is possible? Well lets wait and see what this week bring us and howthe markets will react if more negative US data arrive??¦