U.S. Dollar Finishes the Week Higher Against Most Major Forex Markets
By James A. Hyerczyk
Commodity Trading Advisor registered with the National Futures Association

01 August 2008 @ 05:14 pm EST

In a sign of strength in the face of a global economic slowdown, the U.S. Dollar finished higher for the week against most major Forex markets. The only exception was the USD JPY which closed slightly lower mainly because of stock market uncertainty late in the week. The higher close is most likely a sign that the U.S. economic woes are about to recover while the global weakness may just be beginning to spread.
The EUR USD closed lower for the week as traders ignored the string of weak U.S. economic reports last week and instead chose to focus on the developing weakness in the Euro Zone. Despite a report of higher inflation, the Euro could not rally as many traders feel the ECB will leave rates unchanged because the economy is in the midst of a slowdown. Continue to press the downside in the Euro next week with 1.5302 the next possible downside target. Shorts really do not have to worry unless 1.5768 is taken out.
The USD JPY could not muster a gain last week after looking so promising early in the week. This pair made several attempts to breakout to the upside at 108.42 and 108.59 on its way to a major 50% price at 109.94 but failed to attract any buying interest at the high levels. The inability of the stock market to take out the previous week's high also weighed on this market. The Yen suffered from a lack of demand while the stock markets retraced inside of a tight range toward the end of the week. The daily chart indicates more downside pressure is likely as the trading action on Friday confirmed a closing price reversal top at 108.33. The next downside target is 106.07. Do not expect much on the upside unless this market can blast through 108.59. Without a strong rally in the stock market, this pair may trade sideways to lower until it reaches an area attractive to buyers.
The GBP USD finished lower for the week as traders are finally beginning to realize the U.K.'s economic problems are not going to go away. Pound traders are looking at high inflation, low consumer confidence and a tumbling housing market as the main reasons to continue to sell rallies against the trend. Based on the failure of the rallies last week, it looks as if shorts are entering on the rallies. Talk is still circulating that the U.K. economy is on the brink of recession.
The USD CHF closed higher for the week on expectations the stock market may stabilize and rally next week. With global weakness spreading the Swiss economy is looking weaker than usual. This is leading to talk that the Swiss central bank will leave rates unchanged. The key number to overcome is the main top at 1.0541. A rally through this area is likely to cause short-covering and a push to the major retracement area at 1.0625 to 1.0630.
The USD CAD traded higher for the week. With the global economies weakening, traders believe that demand for commodities may dry up, causing a substantial rally in the U.S. Dollar against the Canadian Dollar. The inability to break this market on the small rally in crude is a sign that traders are beginning to look at the long term picture and seeing lower oil prices. This week the USD CAD may continue to rally to the last major resistance on the weekly chart at 1.0321.
The AUD USD received bad news all week from poor retail sales to bearish home building approvals. Traders are starting to worry about the stability of the Australian economy. Financial market traders are increasing bets of a possible interest rate cut. The main trend turned down on the weekly chart, indicating further weakness to follow.
The New Zealand Dollar is feeling pressure from credit markets risks and the threat of another interest rate cut. In addition to the basic fundamentals, this market received a surprise later in the week that investments and withdrawals were suspended for the New Zealand Guardian Trust Co. Technically, the next downside target is .7241. Watch for a technical bounce at this level.
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