Currency Pair Overview: Dollar Weakens As Huge Week Of Economic Data Gets Underway

Overall: Once again, positive economic news spurred traders to accept more risk and sell the dollar in favor of higher yielding currencies. The dollar decreased against all of the other major currencies, reversing direction from the European session, helped by pending U.S. home sales. The release came in much higher than the 0.1% expected by analysts, at 3.2% and gives optimism that the housing market may have found a base in some regions of the country. Additional risk taking was also seen in the equity market as the DOW gained more than 210 points and the S&P surged 29 points, breaking above the 900 level. Gold prices surged, gaining $13 an ounce on the back of dollar weakness. The week has started in volatile fashion on limited economic news and may continue through the week as the economic calendar is loaded with ‘red flag’ releases. Interest rate announcement from the RBA, ECB and BOE are scheduled this week along with results from the bank’s stress tests and non-farm payrolls. The market is giving strong signals that it wants to sell dollars and that sentiment could be prolonged through the week.

The Euro (Eur/Usd) The euro moved higher on Monday as the market sold dollars on optimism that some areas of the U.S. may have found a base in the housing market. The pair moved higher during the Asian session, reversed direction after the London open and reversed again as the U.S. session got underway. The pair broke and held above the important 1.3350 level after the 200 day simple moving average held as support at the 1.3200 area. Negative euro-zone economic news this morning did little to limit the pair’s move higher. German retails sales came in at -1.0% while Euro-zone Sentix investor confidence fell to -34.3. Final manufacturing PMI came in slightly higher at 36.8.

The Pound (Gbp/Usd) Cable broke above the 1.5000 level intra-day and was struggling to close above that level. The pair moved in a range of approximately 175 pips, moving higher during the Asian and U.S. sessions while hitting the low of 1.4835 during the European session. U.K. markets were closed for a Bank holiday on Monday so there were no economic releases from the U.K. and there are no red flag releases scheduled for tomorrow. 

The Aussie (Aud/Usd) The aussie moved higher as traders became more risk tolerant and sold dollars in favor of higher yielding currencies. Equity markets moved higher as did gold prices, as the dollar declined, boosting the pair. The pair gained approximately 100 pips on the day and sets up tonight’s Asian session in which higher stock markets could continue the move as well as Australian building approvals and the RBA statement after the interest rate decision early tomorrow morning.

The Cad (Usd/Cad) The Canadian dollar continued to strengthen on Monday as speculation increases that the worst of the global economic crisis is over, higher equity markets and higher crude oil prices. The pair lost 245 pips last week and has started this week by dropping 130 pips, closing below the 1.1750 level and breaking below the 200 day simple moving average. Crude oil prices gained $1.20 a barrel on the day closing above $54.40.

The Swissy (Usd/Chf) After breaking above the 100 and 200 day simple moving averages overnight, the swissy retreated back below those key levels, losing 80 pips on the day and closing near 1.1260. The pair closed at the lowest level since March 25. The Swiss PMI index showed that the industrial sector contracted for an eighth consecutive month, coming in at 34.7, higher than the expected 34.0. The SECO consumer climate will be released tomorrow morning. 

The Yen (Usd/Jpy) The S&P gained almost 30 points on Monday while the DOW gained more than 210 points, yet the yen lost 40 pips on the day. The fact that the Japanese currency strengthened against the dollar on a day that equity markets moved much higher is a strong signal that traders just do not want to hold dollars right now. The pair closed the day struggling to hold above the 20 day simple moving average, which was broken to the upside on Friday. There are no economic releases from Japan tonight as financial markets are closed for the second day of a two day Bank Holiday.