Dollar selling continued this week, but the pair had a hard time clearing the 1.5850 resistance level on the way to challenging the 1.5900 all time highs. Perhaps the bears are starting to run out of steam. Certainly the economic data gave them little to chew on this week. Overall the results were mixed as housing data and personal income showed some mild improvement but Durable Goods once again missed to the downside. At best one could say that the US fundamentals have not become dramatically worse and that was enough to keep dollar bears at bay.

The US calendar carries important releases nearly every day of the week with both ISM Manufacturing and Services possibly foreshadowing the state of the US labor market to be revealed in Friday’s NFPs. If data confirms the doomsayers worst predictions showing continuing contraction in US labor demand, the dollar may not be able to hold its ground and 1.6000 could give way. On the other hand if the numbers do not reveal a huge decline of –100k or more, the greenback may inch away from precipice and commence a much needed relief rally.

The U.S. lost jobs for a third month in March and manufacturing contracted at the fastest pace in five years, signs the economy continues to turn down, economists said before reports this week. Payrolls probably shrank by 50,000, according to the median estimate of economists surveyed by Bloomberg News before the Labor Department's April 4 report. The last time the economy lost jobs for at least three consecutive months coincided with the start of the Iraq War in 2003.

Job losses, slumping confidence and the biggest plunge in housing in a generation all point to a slowdown in consumer spending that will weaken growth. Federal Reserve Chairman Ben S. Bernanke will testify before Congress this week after lowering interest rates and extending credit to non-banks in an attempt to calm financial markets.

TECHNICAL OUTLOOK – DAILY CHARTS

EUR/USD

Resistance: 1.5902 - all time high

Support: 1.5540

Sentiment: seems topping before a major reversal

GBP/USD

Resistance: 2.0190

Support: 1.9720

Sentiment: mixed to bearish

AUD/USD

Resistance: 0.9275

Support: 0.9105

Sentiment: mixed

USD/JPY

Resistance: 101.45

Support: 97.70

Sentiment: mildly bullish

USD/CAD

Resistance: 1.0380

Support: 1.0085

Sentiment: bullish

USD/CHF

Resistance: 1.0250

Support: 0.9875

Sentiment: mildly bullish

GPB/JPY

Resistance: 203.00/205.00

Support: 193.00

Sentiment: mildly bearish

The U.S. dollar posted its first weekly advances against the euro and the yen in a month on speculation Federal Reserve moves to revive lending among banks will restore confidence in financial markets and the economy. The greenback also strengthened to at least one-month highs versus currencies of commodity producing nations from Norway to Australia after raw materials including gold and oil tumbled the most in five decades.

Commodities Tumble

The U.S. Dollar Index traded on ICE Futures in New York rose 1.5 percent this week to 72.71. The gauge touched a record low of 70.698 on March 17, the same day the dollar fell to an all-time low against the euro. Gold had its biggest weekly loss since August 1990 and oil plunged almost $10 over three days, after rallying to $111.80 a barrel, the highest ever. The tumble in commodities and the dollar's rebound gained momentum after the Fed reduced interest rates by 0.75 percentage point to 2.25 percent on March 18. The move was less than the full-point cut traders expected, sapping demand for oil and gold as a hedge against inflation.

The collapse in subprime lending will continue to ripple through the economy as property values fall, banks shut off access to credit and payrolls shrink. The worsening outlook indicates the Federal Reserve will keep lowering interest rates to stabilize financial markets and promote lending.

Spending by American consumers slowed in February and home sales continued to drop, signaling the biggest housing slump in a generation has brought the U.S. expansion to a halt, economists said before reports this week.

TECHNICAL OUTLOOK – DAILY CHARTS

EUR/USD

Resistance: 1.5650

Support: 1.5340

Sentiment: bearish

GBP/USD

Resistance: 2.0000

Support: 1.9670

Sentiment: bearish

AUD/USD

Resistance: 0.9250

Support: 0.8770

Sentiment: bearish

USD/JPY

Resistance: 100.65 

Support: 97.70

Sentiment: mildly bullish

USD/CAD

Resistance: 1.0480

Support: 1.0065

Sentiment: bullish

USD/CHF

Resistance: 1.0385

Support: 0.9950

Sentiment: bullish

GPB/JPY

Resistance: 205.15

Support: 193.45

Sentiment: mixed to bearish

Spending was up 0.1 percent last month, the smallest gain in more than a year, according to the median estimate of economists surveyed by Bloomberg News ahead of a Commerce Department report due March 28. Combined sales of new and existing homes dropped to the lowest level in at least nine years, government and private figures may also show.

TECHNICAL OUTLOOK – DAILY CHARTS

EUR/USD

Resistance: sky is the limit....but maybe 1.6000 

Support: 1.1.5500

Sentiment: extreme bullish, off the charts...unusual times...where anything can happen, but what goes up, you know...

GBP/USD

Resistance: 2.0450

Support: 2.0000

Sentiment: hostage of GBPJPY, so look for that pair for further direction

AUD/USD

Resistance: 0.9500

Support: 0.8800

Sentiment: same as GBPUSD as for AUDJPY

USD/JPY

Resistance: 100.00

Support: twd 90.00 and lower

Sentiment: yen is the king...

USD/CAD

Resistance: 1.0125

Support: 0.9720

Sentiment: stuck in a range

USD/CHF

Resistance: 1.0000

Support: ? who knows, watch for gold and the yen

Sentiment: extreme bearish

GPB/JPY

Resistance: 200.00

Support: 190-180 maybe?

Sentiment: extreme bearish

The U.S. unexpectedly lost 63,000 jobs in February, the biggest drop since March 2003, according to a Labor Department report on March 7. The dollar fell toward a record low against the euro and the lowest in eight years versus the yen as some traders started to bet that the Federal Reserve will cut interest rates by 1 percentage point to avoid a recession.

The currency declined for a fifth day against the British pound as widening credit-market losses added to speculation that the Fed will cut its benchmark rate to 2 percent on March 18. The yen gained as a Japanese government report showed machinery orders rose at the fastest pace in more than seven years in January, signaling demand from emerging markets may help the economy withstand a U.S. slowdown.

Futures Traders

Futures traders are betting that the yen will gain against the U.S. dollar in the biggest numbers since February 2004, figures from the Washington-based Commodity Futures Trading Commission show.

The difference in the number of wagers by hedge funds and other large speculators on an advance in the yen compared with those on a drop -- so-called net longs -- was 56,285 on March 4, compared with net longs of 34,289 a week earlier.

The EUR/USD continued trending higher last week making fresh
all time highs four of the five days including Friday. The EUR/USD was boosted
by a steady stream of weak US data culminating with the very poor US job report
on Friday and the ECB meeting on Thursday reinforced the view that the ECB is
not ready to ease rates and are not yet that concerned about the elevated level
of the EUR/USD. The EUR/USD lost a bit of steam on Friday after the Fed
announced more liquidity provision to their TAF initiative, as it suggested to
many that the Fed might not be as aggressive lowering the Fed Funds rate. It
didn"t stop the EUR from gaining over 1% against the USD last week on an
open/close basis.

Preview The EUR/USD is trending higher so picking a top is not advised. Unlike
last week, there is a light event calendar in the week ahead so the FX market
will key on the movements in the equity and credit markets for directional
clues. There are some analysts warning that a rise in US investor risk aversion
might lead to repatriation flows as it did in early February. With the EUR/USD
trending higher it is not advisable to try and pick the top, but longs should
start to show caution at these lofty and technically overbought levels.

TECHNICAL OUTLOOK – DAILY CHARTS

EUR/USD

Resistance: 1.5500

Support: 1.5150

Sentiment: topping! momentum is slowing, sharp decline may occur before it rises again

GBP/USD

Resistance: 2.0450

Support: 1.9920

Sentiment: mixed to bullish

AUD/USD

Resistance: 0.9500

Support: 0.9100

Sentiment: losing up momentum

USD/JPY

Resistance: 104.35

Support: 101.70

Sentiment: bearish

USD/CAD

Resistance: 1.0125

Support: 0.9700

Sentiment: mildly bearish, but range trading mostly

USD/CHF

Resistance: 1.0385

Support: 1.0000

Sentiment: mixed

GPB/JPY

Resistance: 211.360

Support: 202.80

Sentiment: mixed