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07/08/2007 - USD closing weaker, JPY-crosses on the highs

Posted by FOREX.com's Weekly Strategy in July 6th 2007  
* USD closing weaker, JPY-crosses on the highs
* Eurozone finance ministers meeting, may criticize JPY weakness
* Fed's Bernanke speaking on inflation on Tuesday
* BOJ to hold rates steady; Bank of Canada to hike on Tuesday

The USD is closing lower on the week against all non-JPY currencies, in line with last week's observation of a breakdown in the USD index. The USD closed slightly firmer against the JPY, which translates into yet another new high for the JPY-crosses and the carry trade in general. The dollar selling got off to a quick start on Monday and minor new lows were made subsequently. Interestingly enough, positive US economic data at the end of the week sparked only a minimal rebound in the USD. (ISM non-manufacturing rose to 60.7 from 59.7, a 14 month high, and June NFP beat market forecasts, though somewhat below ADP-inspired expectations of 150+, but strong revisions to the prior two months data more than made up). The better US data sent benchmark 10 year Treasury note yields up nearly 20 bps from the week's low, which led to a slight widening in the US interest rate advantage against the EUR, and yet the dollar remained heavy. Persistent USD weakness in the face of the better than expected data and higher rates suggests there is a larger wave of USD selling going through the market and this may be just the beginning of more sustained USD move lower.  Full text »

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