Weekly Summary:The dollar weakens and retreats

The dollar went from being the strongest currency to the weakest in less than seven days. The U.S. currency fell in all crosses and weakened, losing time and was considerably bullish near critical levels which if exceeded would precipitate a further decline.

The dollar went from being the strongest currency to the weakest in less than seven days. The U.S. currency fell in all crosses and weakened, losing time and was considerably bullish near critical levels which if exceeded would precipitate a further decline. European currencies were the best performers, led by the Swiss franc. Shares in U.S. and Europe continue to make maximum of two and a half years and also joined this week Japan, which peaked at 9 months. The volume is still low.

Social protests in the Middle East continue to be monitored, giving importance for now, any abrupt change in the price of oil. Intensified and reached more aggressively and countries with more weight in the global economic scenario, it might see more effects on markets.

The economic data have not changed the line: still a recovery in economic growth accompanied by rapid inflation, led by a rise in the price of food and energy products. In China, experienced a large decline in the trade surplus, at the hands of an increase in imports. This served to further boost the demand for risk assets as it shows the Asian giant demanding more products from the world.



EUR / USD: overcoming weakness

From the technical point of view the pair managed to hold above 1.35, since although it fell below, remained near that level and returned with force above. This if left well positioned at the crossroads, not necessarily imply that the time has already passed downward. The break of a trendline from the peak in February, gave further impetus to enable even more hikes for the time necessary consolidation above 1.3880. Do not be surprised if the pair continues to move between 1.3430 and 1.3860 through the end of the month.

On Friday the currency of the eurozone looked weak but was fired after comments from a European official saying that the bank might have to tighten monetary policy to fight inflation (read: raise interest rates). This prompted the euro and did end the week with most gains in their crosses.

With respect to the Eurozone, there was progress on the future plan of aid to come into force in 2013, which can be good and bring certainty. Moreover, from Spain there are more signs of improvement, debt tenders are going well and banks to finance less than the ECB. The black sheep remains Portugal, where government securities are under pressure again and still the rumors about pressures to request international assistance. The euro failed to follow spreads lusos titles which might indicate that if the situation is worsening, the effects on the euro exchange rate could be quite limited.


GBP / USD: highest weekly close in a year

The book not only had a week that bullish, but to remain at current levels, could be plotting a route to climb to 1.65 or higher. The pair had a very high weekly close since January 2010 and to break above 1.6300, we should expect an acceleration upward. This would achieve the British currency prices not seen in a year.

A good retail sales data also boosted the pound, giving good signs, although the data in the record was overshadowed by a surprise rise in requests for unemployment.Despite the importance of these data, the key issue in the UK spends about inflation and the Bank of England. The retail rate remains above 4%, far from the central bank. This week we will know the minutes of the last monetary policy meeting, key event that could bring a lot of noise. The bank’s report became known last week reported that inflation would reach 4.4% after it boosted the pound as several analysts said this could force the bank to raise interest rates.

USD / JPY: 84.00 Resistance

The crossing between the two currencies lost time and decreased upward, closing the week with a slight loss. Reiterating the previous report, just above 84.50, the dollar extended gains. While it remains below the upload will be limited and risk of major corrections.

The strength shown by the yen was partly due to a slight improvement in the price of U.S. government securities (The price moves in the opposite direction of interest rates). In the past two weeks left interest rates go up, but considering the U.S. fiscal situation and the prevailing mood in the markets, among other variables, from a fundamental standpoint the outlook for these bonds is clearly bearish in the short, medium and long term.

The minutes of the last meeting of the Fed made clear that while there is a consensus vote, not on the opinions and there is almost a given that if the economy continues like this, there will be a new program to purchase securities .


USD / CHF: Great weekly decline

The Swiss franc was the currency has appreciated over the past week. There are no particular reasons but conflicts in the Middle East may be doing his thing. Rises were also against the currencies linked to commodities despite the risk appetite that existed in the stock market.

The crossing between the dollar and the franc (USDCHF) had started the year with great force and recovering from lows, but the second time in 2011 so far failed to hold above 0.97, and managed to overcome 0, 98. After breaking an upward line and fall below 0.9680, the pair fell 300 pips and led the weekly decline.

The magnitude of the decline could make us see corrective movements at the beginning of the week, barring them and if the pair extends drop below 0.9370 would expose the lows. To gain momentum bullish in the short to medium term, the dollar should climb above 0.98 which would enable a greater rise, with initial target 0.9860 and then the zone of parity.


CAD: From best to worst

The loonie to the U.S. dollar were the worst performing currencies in the week, having been among the biggest gainers in the previous. The correlation between movements in the dollar and the loonie over the market and are common. The reasons are unclear, since although the Canadian currency is more sensitive than others to the U.S. data is not sufficient justification to explain what is happening. The new normal is that this will keep happening until the market proves otherwise.

The group of the loonie, the kiwi and the aussie remains near highs in years and possibly to see them tested in the coming days to remedy non-negative surprises in the markets. Overcome, the rises could accelerate all the crosses of group linked to commodities. On the other hand not to be overcome, we expect consolidation movements, being alert to breaks that enable greater downward correction in the dollar.

The AUD / USD can be considered as key support in the short term the area from 0.9920 to 0.9880, while above 1.0180 the probability of reaching new highs would increase considerably.

From a fundamental standpoint, although the appetite for risk, several factors have slowed the rises in these crosses. Mainly the pause in the upward cycle of interest rates, the product of a breakthrough in the global economy less than expected earlier and more risk estimates.

Facundo Molina is founder and director of MolFX - Management, a company fully specialized in Foreign Exchange Markets, with an important client portfolio through Capital Markets Services LLC (CMS). He has a BA Business Management at the Universidad Nacional del Sur (Argentina), where he has a doctorate degree based on the application of Fibonacci theory into financial markets. He also acts as professor of new and experiments traders.