Last week currency traders were bearish on the US dollar as it showed declines over the world’s major currencies. Any effect the surprising increase in personal spending was at least somewhat offset by savings jumping to it’s highest level in 15 years.
The EUR/USD was up on Friday and closed the trading week at around 1.4070. This was a gain on the week for the Euro of a little more than 100 pips and just missed hitting new yearly highs against the US dollar. The trading range for the currency pair remained very wide and a clear trend has yet to emerge. Technical analysis of the currency pair indicates there is some consolidation going on after the last major bullish movement. There is a resistance level around 1.4080 and support levels around 1.3925.
The British pound rose against the US dollar for the 3rd week in a row, but like the EUR/USD pair, failed to break out of its recent technical highs. The GBP/USD currency pair had a brief spike trading up to around 1.6536 just after the US released its personal spending and personal income and savings data. High volatility makes it difficult to discern short term resistance and support levels, however market traders believe it will continue to move in the 1.62 to 1.66 range.
The New Zealand dollar was also outperforming the US dollar hitting three week highs and trading on the week around 0.5165. Part of the news driving the NZD/USD currency pair higher was a 50 basis point interest rate cut by New Zealand’s Central Bank, bringing the target interest rate down to 3%.
The USD/JPY ended the week on Friday at around 95.26 and USD/CAD ended last week at around 1.1524 after bouncing off of a technical resistance level of 1.3 for the 4th time in recent trading. The dollar yen currency pair has been showing lessening volatility and tightening bollinger bands and should continue to trade in a range of 95.00 to 96.50. However watch for a near term breakout to the upside if it goes above the top resistance line. The USD/CAD is having somewhat of a consolodation period but is still bullish and is continuing its consistent rise, with 1.1640 the next resistance level.
The Swiss national bank was rumored to be intervening in the currency markets again last week. The bank admitted to getting involved in the markets previously around March 12 of this year. During the London trading session on the 12th they were buying Euros and selling the Swiss Franc and During the New York session they were buying the US dollar and selling francs. All in an attempt to control the increase of the Swiss currency and stave off deflation. The strategy has not worked very well in the recent past and did not seem to have the intended effect as the Franc gained around 1.3% against both the US Dollar and the EURO after each intervention. It has also been tried on a large scale with the British Pound, legendary investor George Soros’ claim to fame was when he believe the central bank actions could not support the price of the currency and made more than a billion dollars in his fund after the government abandoned the strategy. The Japanese central bank has had the most success with this strategy, striving to keep the US Dollar around a 100 Yen.
After all this, including a bounce on Wednesday and a drop on Thursday and Friday the pair closed out the week at 1.0825. The USD/CHF currency pair continued trading mostly sideways with no clear trend present. For the next few weeks many investors expect the pair to trade around 1.078 indicating more sideways price action in what has always been considered the safe haven currency.
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