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The U.S. Dollar continued its decline against all the major currencies last week, extending its previous week’s substantial losses. The U.S. Dollar Index lost -1.31 points last week to close at 78.09, showing a net loss of -1.65 percent.

The Euro was again the best overall performer against the Greenback, rising 2.1 percent last week. The Euro was followed by the commodity currencies, with the Australian Dollar gaining 1.4% and the New Zealand Dollar rising by 1.3%.

The Japanese Yen gained 1.2% and the Canadian Dollar strengthened by a lesser 0.5%. The Pound Sterling clearly underperformed the other currencies since it was up a mere seven pips on the week versus the U.S. Dollar and so ended virtually unchanged.

U.S. Dollar Declines after Disappointing CB Consumer Confidence Results

 

The U.S. Dollar’s continued slide last week was partly due to the CB Consumer Confidence Survey results which came out under the psychologically important 50 level at 48.5 “” a level not seen since last February, when the number hit 46. Market expectations were for a 52.5 number, and this disappointment sent the U.S. Dollar south against all the other major currencies.

In addition to the loss of public confidence expressed in the CB Consumer Confidence number, a number of officials from the Federal Reserve expressed interest in further expanding quantitative easing measures to help stimulate the deteriorating U.S. economy.

While most of last week’s economic data out of the United States showed some improvement, the signs that the Fed probably aims to increase the money supply in the near term will most likely further deteriorate the value of the U.S. Dollar versus other currencies.

The Euro Continues Gaining Against the Greenback

The Euro gained an impressive 2.1 percent against the Greenback last week, bringing its two week rally against the U.S. Dollar to over five percent. Regardless of the fact that the European economies are not much better off than the United States’ economy, several factors contributed to the Euro rally.

One of the key factors behind the Euro’s meteoric rise last week consists of the fact that many European banks are not borrowing as much from the ECB as the market previously thought they would need.

The ECB announced it would only lend banks 29.4 Billion Euros in six day loans after 225 Billion Euros of 6, 12 and 18 month loans expired. This lending was considerably lower than expected, as was the 104 Billion Euros of three month loans offered the previous day.

Also, the number of banks requiring funding fell from 78 in July down to 50 in the most recent funding round that was taken as yet another favorable sign for the European banking system.

Australian Dollar Continues Firm after Gold Hits New High

The second best performer against the Greenback last week was again the Australian Dollar, which gained 1.4% on the week. The Australian Dollar remained firm most of the week despite disappointing economic numbers coming out of Australia.

The most significant factor in the Aussie’s rise “” as well as the New Zealand Dollar which rose in sympathy with the Australian currency “” was the price of gold, which made a new all time high of $1,320.48 last Friday. The precious metal had also made several new all time highs during the course of the week.

While the heady price of gold may have contributed to the Aussie’s recent run up, such commodity strength also prevented the Canadian Dollar from dropping any further against the U.S. Dollar.

The Loonie was the weakest of the commodity dollars last week “” gaining only 0.50% against the Greenback “” primarily because of disappointing economic numbers seen out of Canada.

Forex Market Implications

It seems that the almighty U.S. Dollar has finally begun to show signs of weakness. Nevertheless, a brief correction higher during the coming week might put a more solid foundation under the Greenback’s most recent decline.

Basically, with rising commodity prices that includes a new all time high in the price of gold “” combined with the near certainty that the Fed will soon begin a new round of economic stimulus programs that amounts to fresh easing measures “” the case for a pending hyper inflationary environment in the United States keeps getting stronger and stronger.

Accordingly, buying or covering shorts in the Greenback on a near term basis might be a good swing trade to benefit from any corrective upside price action. With that noted, traders doing so should beware of a sharp turnaround and get ready to bail on any U.S. Dollar longs and also look to re-establish Dollar shorts on rallies.

Furthermore, although at or near record highs, the Aussie, Kiwi and Loonie commodity dollars continue to be favored over the lesser improvement foreseen for the Euro, Sterling and Yen versus the Greenback.

Weekly Recap and Outlook for the U.S. Financial Markets and Dollar – 10/04/2010 The U.S. Dollar weakened across the board against all the major currencies for the second consecutive week last week as U.S. Federal Reserve officials expressed their support for yet another round of economic stimulus measures.       Read full report

Weekly Recap and Outlook for EURUSD – 10/04/2010 EURUSD substantially extended the gains it made the preceding week during last week’s trading sessions, as the Greenback continued falling versus all of the other major currencies for the second week in a row. The pair started the week off by trading softer after news was released that the Eurozone M3 Money Supply had expanded by +1.1% for the year since this was significantly above the +0.4% rise anticipated. Tuesday then saw EURUSD make its weekly low print at the 1.3380 level in spite of news that the GfK German Consumer Climate index had gained ground to 4.9 compared with the market consensus for a 4.3 reading. Also, German Preliminary CPI fell by only -0.1% versus the anticipated drop of -0.2%. Read full report

Weekly Recap and Outlook for GBPUSD – 10/04/2010 GBPUSD saw several volatile trading sessions last week as traders increasingly speculated about the possibility of more quantitative easing from the Bank of England. Cable began the week by consolidating within a limited range during Monday’s session in the absence of any important economic data coming out from the United Kingdom or the United States. Read full report

Weekly Recap and Outlook for AUDUSD – 10/04/2010 AUDUSD persisted in heading even higher last week as gold traded to yet another fresh all time high last Friday. The rate began the week by consolidating its gains from the previous week and generally ticked higher despite the absence of significant economic releases out of Australia or the United States on Monday. Read full report

Weekly Recap and Outlook for NZDUSD – 10/04/2010 NZDUSD continued to firm during last week’s trading versus the Greenback, with Kiwi strengthening on the back of rising gold prices that prompted across the board gains for the Commodity Dollars. The rate began the week by trading on a softer note on Monday despite the absence of any notable economic data coming out of New Zealand or the United States. Read full report

Weekly Recap and Outlook for USDJPY –   10/04/2010 USDJPY lost additional ground last week as the Yen cautiously extended its gains against the Greenback after the last round of official intervention from the Bank of Japan that was seen a few weeks ago. The rate started out last week with a positive tone as it traded up to its weekly high point at the 84.39 level during Monday’s session after the Japanese Trade Balance came out showing a surplus of 0.59T. This was significantly better than the anticipated 0.52T level, and the previous number was also revised down to 0.59T from the 0.61T level. In addition, the Japanese CSPI fell by just -1.1% for the year on year that compared favorably with the expected decline of -1.2%. Read full report

Weekly Recap and Outlook for USDCAD – 10/04/2010 USDCAD came off even further last week as the U.S. Dollar declined across the board and the price of gold made fresh all time highs. The rate started the week out on a positive note during Monday’s session in the absence of any significant economic data out of either the United States or Canada. Read full report

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