Dollar Closes Higher for Week against a Basket of Currencies
After reaching a 15 month low early in the week, the U.S. Dollar closed higher for the week against a trade-weighted basket of currencies. Technically, this closing price reversal, once confirmed, often leads to a 2 to 3 week retracement. The daily chart suggests that a move through 77.50 is necessary to turn the main trend to up.
The low for the week for the Dollar was posted shortly after Fed Chairman Bernanke mentioned his concern for the Dollar in a speech. Although he never said the Dollar was too weak, he did say that the Fed would monitor its value to make sure that it did not interfere with its mandate to shore up employment and maintain price stability.
At first this statement seemed like the similar lip-service the Treasury usually produces when asked about the Dollar. Traders definitely reacted this way when they sent the Dollar lower and stocks higher. The next day, however, European Central Bank President Trichet stated he agreed with Bernanke then proceeded to talk up the Dollar. In my opinion, it was the statement by Trichet which had the most impact on the Dollar as it put an end to the rally in the Euro.
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