The dollar saw a very volatile session during last week's trading. The dollar began last week's session with a falling trend against the euro and the British pound. The EUR/USD pair reached as high as the 1.3755 level and the GBP/USD reached as high as the 1.6015 level. Yet eventually both pairs reversed trends, the EUR/USD is now trading near the 1.3585 level, and the GBP/USD near the 1.5830 level.
The dollar recovered against most of the major currencies for two main reasons. First of all, the dollar strengthened following positive signals from the U.S. economy. The confidence among U.S. consumers rose in January to the highest level in eight months as Americans became more optimistic about job prospects. In addition, sales on new homes in the U.S. rose more than forecasted in December to a 329,000 annual pace.
The second reason for the appreciation of the dollar is the political turmoil in Egypt which has boosted demand for safer assets. The concerns are that the unrest will spread to oil-producing nations in the Middle East, and will damage oil supplies from the region.
As for this week, the most exciting economic release is expected on Friday, as the Non-Farm Employment Change is scheduled. Current expectations are that the labor sector in the U.S. continues to recover during January. Traders are also advised to follow the ADP forecast of this release, which is expected on Wednesday, as it is likely to create high volatility as well in the marker.