Weekly Review 8.3.2010:
The Dollar gained versus the Euro, Pound and the Yen and weakened versus the high yielding Canadian and Australian Dollar. The Correlation between Risk Aversion and the Dollar was weaker the past week as we've seen the commodity linked currencies rise, but weak fundamentals and rumors held the Euro and the Pound lower. Stronger than expected NFP figures led to some gains in the Euro and the Pound, but wasn't able to break above and lead these currencies to weekly gains. NASDAQ and Dow Jones declined by -0.18% and -0.08% respectively. Crude Oil gained by 2.3% the past week closing at 81.5$ a barrel and Gold (XAU) gained by 1.6% closing at 1,135.2$. Looking ahead, on Wednesday Federal Budget Balance is expected with -199.5B versus -42.6B prior. Trade Balance will be released on Thursday along with the weekly Unemployment Claims. Core Retail Sales and Retail Sales are expected weaker on Friday and Michigan's Sentiment will also be released on Friday.
The Euro weakened by -0.1% versus the Dollar, unable to breakout of its monthly trading range. The Euro has been choppy all week long, unable to find a trend. Announcements and comments concerning Greece's debt have moved the Euro all week long, and NFP data on Friday helped the Euro to gain back. ECB Left the Interest Rate unchanged at 1%. Further developments concerning Greece's bailout or Spain, Portugal or Ireland debt problems could help the Euro breakaway from its current range. Overall, EUR/USD traded with a high of 1.3735 and a low of 1.3435. EUR/USD is almost in oversold RSI conditions on the weekly chart. The pair was unable to break below the 1.3450 support or above the 1.3750 resistance level, and keeps trading in that channel. Looking Ahead, German Industrial Production is expected on Monday and French Industrial Production on Wednesday. ECB will release its Monthly Bulletin on Thursday. Industrial Production will be released on Friday along with a speech from ECB's President Trichet.
The Pound declined by -0.6% versus the Dollar reaching a 10 month low on bearish outlook for the economy. Mortgage Approvals slipped to a 8 month low and BOE officials released a bearish outlook and kept the Interest Rate and QE Program unchanged. Rumors concerning the next U.K elections helped drag the Pound lower. Overall, GBP/USD traded with a high of 1.5203 and a low of 1.4780. GBP/USD has continued lower and is near weekly oversold conditions. The pair wasn't able to remain below the 1.48 support and we might witness a retracement upwards this week. Looking Ahead, BRC Retail Sales and RICS House Price Balance will be released Monday Night. Trade Balance is expected slightly improved on Tuesday. Manufacturing Production and NIESR GDP Estimate will be released on Wednesday. Consumer Inflation Expectations will be released on Thursday.