The dollar rallied against the yen last week

The dollar rallied against the yen last week on cross trading and due to declining concern of international criticism toward the weak Japanese currency. The European currencies traded sideways to lower while the Canadian dollar strengthened on M&A activity and on official neglect toward its strength. There is a good chance the dollar will make a more sustained rally this week despite the week non-farm payrolls report.

Past Week's Data and Events
United States

The dollar managed to recover some early losses and will attempt to make a stronger upmove this week. The yen weakened further on cross trading but the Canadian dollar rallied further as the M&As continued unabated.

The religious/political upheaval in Turkey gave the dollar an early jolt on the last day of April. The situation clearly nixes Turkey??™s chance to joint the European Union and highlights the threat of religious extremism in today??™s world.

Personal income in March 2007 rose 0.7 percent from February's upwardly revised 0.7 percent. March consumer spending rose a smaller-than-expected 0.3 percent from +0.7 percent. Disposable personal income increased 0.7 percent. The March saving rate came in at -0.8 percent from -1.2 percent in February.

Nominal personal consumption expenditures (PCE) increased 0.3 percent in March.

The National Association of Purchasing Management-Chicago business barometer fell to 52.9 from 61.7 in March.

The Institute for Supply Management's manufacturing index rose to a higher-than-forecast 54.7 in April, the highest since May 2006, from 50.9 in March.

Factory goods orders rose a more-than-expected 3.1 percent in March from February??™s upwardly revised 1.4 percent gain.

Productivity declined to an annual rate of 1.7 percent in the first quarter from a 2.1 percent increase in the fourth quarter.

The dollar rallied on Thursday on news that the Institute for Supply Management's services index rose to 56.0 in April from a four-year low of 52.4 in March. The new orders component rose to 55.5 from March's 53.8, the prices-paid index edged up to 63.5 in April from 63.3 in March, and the jobs component rose to 51.9 to from 50.8.

Non-farm payrolls came in just below expectations in April, rising 88,000, but the March report was revised downward to 177,000 from 180,000 and the February payrolls to 90,000 from 113,000. The unemployment rate rose to 4.5 percent in April from 4.4 percent in March.

Weekly claims for unemployment benefits unexpectedly fell to a three-month low of 305,000 last week from 326,000 (up from 321,000).

The index of pending home re-sales, fell 4.9 percent to 104.3 in March, the lowest since March 2003, after a revised 1.1 percent gain in February, according to the National Association of Realtors.

The Eurozone

The euro/dollar sank through Thursday and then recovered losses on Friday to close little changed on the week.

German retail sales report contracted 0.7 percent in March while the February report was revised down to +1.0 percent from 1.5 percent.

The number of unemployed in Germany fell 9,000 to 3.845 million in April, keeping the jobless rate at 9.2 percent the lowest level in nearly six years, as companies hired workers to fill orders.

The Eurozone manufacturing PMI was unchanged at 55.4 in April, while the services PMI fell to 57 from 57.6.

The Eurozone retail sales came in at 0.5 percent in March.

Japan

Dollar/yen rallied last week.

Japanese wages fell 0.4 percent in March after dropping 1 percent in February.

The UK

The pound encountered further selling pressure last week.

U.K. manufacturing PMI slipped to 53.9 in April from a revised 54.2 in March, according to the Chartered Institute of Purchasing and Supply.

In the same vein, services PMI fell to 57.2 in April from 57.6 in March.

Canada

Dollar/Canada sank to an eight-month low last week following strong economic data and after BoC??™s Dodge noted that the central bank will not curb the strength of its currency.

The monthly GDP grew by a higher-than-expected 0.4 percent in February due to a high increase in the energy production from +0.1 percent in January.

Canadian producer prices expanded 1.3 percent in March.

Switzerland

Dollar/Swiss edged higher last week.

The Swiss CPI rose 1.1 percent in April consumer prices and 0.5 percent on an yearly basis.

Australia

The Aussie/dollar encountered further selling pressure last week and that pressure accelerated on Friday.

Reserve Bank of Australia left the overnight cash rate target at a six-year-high 6.25 percent for a fifth straight meeting.

The Australian dollar fell sharply on Friday after the RBA forecast the slowest inflation rate in two years.

This Week's Data and Events
United States

The US economic agenda will start on Wednesday, when the FOMC will leave rates unchanged at 5.25 percent.

Thursday will see the release of the Trade Balance report for March.

The PPI and the Retail sales report for April are due on Friday and both reports are possible market movers.

The Eurozone

The Eurozone economic calendar begins on Monday with the release of the German Factory Orders report for March.

Tuesday will see the German Industrial Production report for March.

The German Trade Balance for March is due on Wednesday.

On Thursday there will be the French and the Italian Industrial Production reports for March.

Also on Thursday, the ECB will leave rates unchanged at 3.75 percent.

Japan

Japan??™s economic calendar is light this week after the Golden Week.

Wednesday will host the Coincident and Leading Indices reports for March.

The UK

The UK calendar will start on Wednesday with the release of the Nationwide Consumer Confidence report for April.

Thursday will see the Trade balance report for March.

The Industrial Production report for March is due on Thursday as well.

The Bank of England may hike rates from the current 5.25 percent.

On Friday there will be the Halifax house price report for April.

Canada

Canada??™s agenda will start on Thursday with the release of the New Housing Price report for March.

The Merchandise Trade report for March is due on Friday.

Overview
Euro/dollar

Last week's range: 1.3534 ??“ 1.3679 (Down)

Previous range: 1.3539 ??“ 1.3683 (Up)

Euro/dollar fell through Thursday and then recovered most of its losses. The pair remains overbought after reaching an 11 ??-year high a week earlier. Sell it again only if a bearish reversal is confirmed.

Immediate resistance is at 1.3620. Above 1.3683, resistance comes at 1.3805. Distant resistance is now seen at 1.3915.

There is initial support at 1.3535. Below 1.3470 there is support at 1.3440. Distant support is at 1.3390. Only a close below 1.3325 would signal the end of the uptrend, but this is very unlikely.

NEAR-TERM:Mixed

MEDIUM-TERM:Bullish

LONG-TERM: Bullish

Dollar/yen

Last week's range: 119.08 ??“ 120.47 (Up)

Previous range: 118.23 ??“ 119.76 (Up)

Dollar/yen exploded higher to a nine-week high last week. The rally may continue but at a reduced pace.

Resistance is at 120.75. Distant resistance now comes at 121.05 from a 50-point pivot, which targets 120.55 and 121.55.

Below 119.90, support comes at 119.65 from another 50-point pivot that targets 119.15 and 120.15. Next level is 118.85. Strong support is still seen at 118.25 from a 50-point pivot that targets 117.75 and 118.75.

NEAR-TERM: Mixed

MEDIUM-TERM: Bullish

LONG-TERM: Bullish

Sterling/dollar

Last week's range: 1.9844 ??“ 2.0073 (Mixed)

Previous range: 1.9866 ??“ 2.0062 (Down)

Sterling/dollar reduced losses incurred during most of the last week. It??™s been under pressure since peaking on April 18 at 2.0131 and the recovery on Friday suggests some upmove this week. Again, this is primarily because is reached the bottom of its rising channel.

Initial resistance is at 1.9995. Above 2.0070, resistance remains between 2.0131 and 2.0151. If this area breaks, the pound would likely take attack a Gann level at 2.0200. Further resistance looms in the 2.0300 area, but this is very unlikely.

Immediate support is at 1.9845. A close below this level would signal trouble for the Cable??™s uptrend. It would then challenge the 1.9800 area. Below 1.9780, distant support follows at 1.9700.

NEAR-TERM: Mixed

MEDIUM-TERM:Bullish

LONG-TERM:Bullish

Dollar/Swiss franc

Last week's range: 1.2031 ??“ 1.2189 (Up)

Previous range: 1.1996 ??“ 1.2127 (Mixed)

Dollar/Swiss franc rallied to a three-week high before reducing gains on Friday. The medium-term outlook remains negative, but only a close below this level confirms the move.

Immediate support is at 1.2095. Next level is 1,2065. Below 1.1996 there is a key level at 1.1945.Dollar/Swiss franc then has strong support at 1.1885.

It would take a break above the resistance at 1.2195 to signal a more sustained recovery. Further resistance is at 1.2255 and 1.2290. Distant resistance is at 1.2370.

NEAR-TERM: Mixed

MEDIUM-TERM:Slightly bearish

LONG-TERM: Bearish

Dollar/Canada

Last week's range: 1.1033 ??“ 1.1197 (Down)

Previous range: 1.1130 - 1.1232 (Down)

Dollar/Canada fell for seven straight weeks to reach an eight-month low at 1.1033. Following a weak recovery, the decline should continue

Below 1.1033, the pair has support at 1.1000. Dollar/Canada then has support at 1.0930. Distant support is at 1.0820.

Immediate resistance is at 1.1115 the pair has a cap at 1.1230. Next level is 1.1305. Above 1.1365, the next level is 1.1420. Distant resistance is at 1.1550.

NEAR-TERM: Bearish

MEDIUM-TERM: Bearish

LONG-TERM: Bearish

Euro/yen

Last week's range: 162.44 ??“ 163.58 (Up)

Previous range: 160.23 ??“ 163.21 (Up)

Euro/yen made climbed to a new lifetime high of 163.68 last week. For as long as the 152.40 level holds, the upside remains favored.

Initial resistance is at 164.15. Next level is 165.15. Distant resistance now looms at 166.95.

Immediate support is still seen at 162.25. This is followed by 161.25. A close below this level would signal a significant decline. The next level remains 160.40. Below 159.50, the euro/yen has distant support at 159.00.

NEAR-TERM: Bullish

MEDIUM-TERM: Bullish

LONG-TERM: Bullish

Euro/sterling

Last week's range: 0.6798 ??“ 0.6838 (Mixed)

Previous range: 0.6774 ??“ 0.6843 (Up)

Euro/sterling traded sideways in a tight range and got stuck in an inside range. More information is needed.

Strong resistance remains at 0.6841 from a Fibonacci retracement level. A pivot high lies at 0.6867. Distant resistance is at 0.6960.

Initial support comes at 0.6800. This is followed by 0.6780. Below 0.6774, another strong level is at 0.6740 from a Fibonacci retracement level. Further support remains at 0.6725. Strong support follows at 0.6690.

NEAR-TERM: Mixed

MEDIUM-TERM: Bullish

LONG-TERM: Bearish