The U.S Will Take Center Stage For A Little Longer

This week has been a very volatile week for the currencies, but those who have watched other
markets like the stock or bond markets would have seen that it was a global sell-off which made
money flow back into the dollar.
In my previous article I warned of the upcoming inflation that is now obviously starting to threaten
the markets. It can been seen in recently published data that the U.S economy is starting to pick up
again after a slow first quarter .The thing that should be taken into consideration is that, normally
when inflation starts to pick up or fear comes into the markets people tend to hold their money close
to hand.

Recent Data

Non farm payrolls +157,000 (more than expected)
US manufacturing +55% (more than expected)
Durable goods orders +0.8% (more than expected)
Unit labor cost 1.8% (more than expected)
Initial jobless claims 309K (less than expected)
International trade balance 54.9 (narrowed more than expected)

The Bond Affect

Recently the Bond yield curve is beginning to receive the tail of a "normal" shape from being virtually
flat.
Even though the recent change is very minor, it means that the current economy in the U.S is
becoming healthier and is starting to pick up again. That puts the Fed in a conflict, between lowering
rates or raising rates. That conflict can be seen in the yield curve's shape, which explains why the
Fed is preventing taking any further monetary actions. Investors in short term bonds and stocks are
demanding a rate cut for continuous growth but in the long term ,fear of future inflation is starting to
be embodied in the market prices.
This week we saw the long term yields break the 5% barrier and surge up to 5.25% showing the
compensation that is demanded by the bond market.
The markets have seen familiar times like these before and it is all a matter of time until the bond
market gets accustomed to the situation and money will start to flow back into bonds, stocks and
overseas currencies in order to continue global trends.

Future Data
Next week the economic calendar is going to be filled with data than can on one hand turn the
situation around or on the other hand continue to give the dollar the backing it needs in order to
break strong resistance levels.
For the dollar to continue its recent rally there is a demand for further data showing that inflation is
continuing to rise is a threat on the American economy.
The economic calendar should be watched very carefully this week!!!!

AUD/USD

Can anything stop this recent rally?
There have been two things fueling this recent rally:
1. Carry Trading- taking loans in countries that have low interest rates for example Japan and
investing the money in countries with high interest
2. Until now the GDP is at roughly 1.6% from the beginning of the year, inflation is a main
threat in Australia which is keeping interest rates high
Strong U.S data could give the AUD a strong enough pull back in order to jump on and enjoy
further profits.

The Talk Of The Markets CAD/USD

Since the break out at around 1.11 the Canadian dollar has not stopped rising, but where is it going
from here?
Due to the recent data in the U.S the CAD has slightly pulled back. Even though recent Canadian
data is giving the bank of Canada justification to continue rising rates by the summer, we should see
a clearer picture towards the end of the week when results are posted.

Summary

• Up coming Data will probably continue to hold the current volatility in the markets.
Fundamental Traders can use this wisely.
• The GDP and EUR have reached support levels. Strong economic Data from the U.S This week
could bring the dollar to target levels which were published in my previous report.
• Traders wanting to take more profits on recent rallying currencies could see comfortable entry
positions on future pullbacks if U.S data is strong.
• Stop-losses should be used at all time.