The U.S. Dollar gained versus the EUR but extended losses against the JPY since Friday, after the U.S. Consumer Sentiment index unexpectedly declined in early August. The data aided the Dollar, which in many instances has tended to move in the opposite direction to its economy, due to higher risk aversion. The most important data expected today is the Empire State Manufacturing Index and TIC Long-Term Purchases from the U.S. at 12:30 GMT and 13:00 GMT. It is recommended that you open big positions in the USD’s main pairs now, as market volatility builds up today.

New+Picture Empire State Manufacturing Index to Lead USD Trading

USD – U.S Dollar Soars against the EUR and GBP

After going through the beginning of last week with falling trends, the Dollar finished last week significantly higher against most of its major currency pairs. However, against the Yen, the Dollar continued to drop, and the pair now stands at the 94.50 level.

The Dollar’s bearishness at the start of last week’s trading was owed to much negative U.S economic data. The Federal Budget Balance showed pessimistic, proving that the U.S. federal budget is deep in deficit. Additionally, the U.S. retail sales data was unexpectedly negative, emphasizing that U.S consumers have yet to regain their faith in their financial security. What’s more, the Federal Reserve avoided hiking Interest Rates last, despite its record low. Both of these factors led to an extremely bearish USD.

The Dollar’s downtrend was reversed in the latter part of last week, as the relatively positive inflation data, which was published via the Consumer Price Indices CPI managed to make investors bullish on the Dollar. The drop in commodities prices, such as Gold and Crude Oil, was another dominant factor responsible for USD recovery.

Looking ahead this week, much market moving data is expected from the U.S. economy. Amongst the main publications are the Building Permits and the Producer Price Index PPI on Tuesday, and the Existing Home Sales on Friday. The Building Permits is expected to be the best figures in 8 months, and the Dollar is likely to strengthen as a result. However, the PPI is forecasted to deliver its first negative result since March. Negative inflation data could erase the Dollar’s recent recovery. Traders are advised to open their USD positions now, in order to make maximum profits this week.

EUR – EUR Set For a Volatile Trading Week

The EUR saw an incredibly volatile session during last week’s trading. The European currency began the week with a sharp bullish trend against the Dollar, just to lose its gains close to the weekend. The EUR saw a significant uptrend against the British Pound on the one hand, yet a sharp drop against the Yen on the other hand.

It seems that the EUR’s volatility has come as a result of the mixed data form the Euro-Zone’s major economies. For example, the French economy saw its first signs of recovery as the French Industrial Production rose by 0.3% in June, suggesting positive inflation. However, European Industrial Production dropped by 0.6% in June. The German Gross Domestic Product GDP unexpectedly rose by 0.3% in the 2nd quarter, showing that the German economy unexpectedly rose out of recession. On the downside for the EUR last week was that the European Consumer Price Index dropped by 0.7% in July, indicating that inflation is still dropping in the Euro-Zone.