Dollarâ�,��"�s Retrace Rally
Another week another gain for the greenback, albeit  a very small one.  The dollar managed to eke out a 40 bp gain against the euro despite generally lackluster economic data. Durable Goods contracted by -4.6% vs. 0.5% expected. Housing, while beating lowered expectations was still down on a year over year basis in both New and Existing Homes and finally the PCE Deflator came in only at consensus. Although the core PCE showed a 2.1% rise it was hardly enough to set off inflationary alarms at the Fed. Yet the dollar did not care, shrugging off the lackluster data. This was the week when dollar bulls were able to â�,��"accentuate the positiveâ�,� and â�,��"eliminate the negative.â�,�

The truth of the matter is that with sentiment so dollar bearish, ( the CME had record Euro longs just two weeks ago) a greenback rally was due. The anti-dollars simply ran out of steam as no new reasons to sell the buck popped up on traderâ�,��"� screens.

Next week might not be so kind to dollar longs. After what is likely to be a very quiet holiday Monday, the greenback will be faced with host of challenges including expected weak Consumer Confidence numbers, lower Chicago PMI and last but certainly not least the possibility of weak Non Farm payrolls. The market expects the report show 170K jobs, but a downward surprise may well be in order.  With weekly jobless claims rising on a  4 week average and consumer spending clearly slowing down a low NFP result is certainly not out of the question.  Should that occur the probability of a June rate hike by the Fed will decrease materially and so will the dollarâ�,��"�s chances of staying afloat.

Euro Continues to Churn
The IFO printed better than expectations at 105.6 vs. 105 expected but the good news offered only the briefest of lifts for the euro. The unit simply could not muster much momentum as 1.2900 continued to be a key area of resistance.  The euro was further hurt by a sharp drop in EZ Industrial New Orders which shrank -2.4% vs. -0.7% expected suggesting that the massive appreciation in the currency may be finally exerting a toll on the regions critical export sector.  Although EZ FinMin dismissed the idea that a higher euro was dangerous for the EZ recovery, the words of Tierry Breton of France that "everything" must be done to stop the single currency from rising too much against the greenback continued to resonate through the market.

Next week, the single currency could find a decidedly firmer bid if   slew of data scheduled for release meets or beats expectations. German Retail Sales which are expected to rebound 1.5% from last months disappointing -2.7% decline while Unemployment and PMI Manufacturing reports are all forecast to confirm the budding EZ recovery. However, the true test for the pair will most likely occur on Friday as the market reacts to Us Non â�,�“Farm payrolls. That  may well be the key release that will determine if the EUR/USD can surmount the 1.3000 barrier or not.

Yen Capped By 113?
BoJ Governor Toshihiko Fukui used more yen positive language this week stating in an interview that the central bank doesnâ�,��"�t want to be â�,��"too far behind the curveâ�,� and â�,��"upward price-pressures are expected.â�,� While his rhetoric buoyed yen sentiment somewhat, the economic results failed to sustain the enthusiasm.  Reads on April convenience store sales and the services-based Tertiary index for March both dropped greater than had been expected.  Price action following these reports pushed the pair to the first of its three failed attempts to scale the 113 barrier.  The next move to the now important handle was the result of a weak trade balance. While the final approach came after otherwise decent national and Tokyo inflationary indicators did not reach the lofty pre-release projections of 0.7% gains.

This week will also be full of economic substance with the inevitable BoJ commentary for flavoring.  Most of the releases scheduled for the period will go towards determining the health of the consumer sector.  Aprilâ�,��"�s jobless rate, household spending and earnings will offer a direct measure of all the necessary components necessary for a strong consumer sector. Other significant gauges set for release are a large jump in industrial activity and the suspected drop in retail sales, both for the month of April.

Sterling Data Grows Cold
Just the week before, the pound was pushing the 1.90 level; and only five days later, cable is on the verge of falling through the 1.85 figure instead.  Leading to this painful turn of events was a week of data that can only be described as dreary.  Starting the fundamental flow on Wednesday, the CBI Industrial Trends Orders indicator slipped to a -12 read vs. expectations of a robust rise to -8.  Not even a 1.7% increase in  business investment over the first quarter could offset the negative sentiment for the business sector of the economy, since MPC member Paul Tucker came on the wire saying this firm investment recovery is weaker than other upturns in the past.  The quarterly data continued into the following session with the report on GDP and its components.  Both quarterly and annual measures of economic growth matched their respective consensuses, leaving the component data to move the markets.  The most noteworthy sub-read of the gross measure was the greater than expected slowdown in private consumption.

This coming weekâ�,��"�s lineup is stocked with a breadth of economic gauges all released mid-week.  Lending and consumer confidence indicators will illuminate consumer spending habits.  The nationwide housing indicator will offer the first look into the market for May.  And the CIPS manufacturing and construction indicators will reveal if the market should really worry about last weekâ�,��"�s business investment and industrial trends report as the harbinger of a struggling manufacturing sector.

Swissie Regaled With Data
Finding a direction in the swissie was a struggle last week with three solid moves interspersed with directionless range-trading.  The first big move of the week came off of an adjusted retail sales figure that at first glance seemed undeniably bearish.  However, the market was able to contain itself long enough to realize the initial 6.8% plunge in sales was largely the result of an adjustment of two fewer shopping days in month, whereas the unadjusted figure actually rose slightly.  The patience taken with interpreting this figure was well rewarded as the unit advanced nearly 200 pips.  The only other fundamentally driven session of the week came the following day.  Tuesdayâ�,��"�s Swiss releases included a broadening trade balance in April, rising level of employment for the first three months of the year and falling UBS consumption indicator.

Out goes one busy week of data and in comes another.  This coming weekâ�,��"�s slate of economic releases is shaping up to be one that could put the Swiss unit back on tradersâ�,��"� bid lists while also perking the ears of SNB policy members. The KOF leading indicator of business expectations will kick things off with expectations of a respectable rise that could bode well for future employment and growth figures.  Then, probably the most heavily weighted session for the franc in terms of economic data this year, will happen on Thursday with release of CPI, GDP and the SVME-Purchasing Managers Index.  Though the mix is numerous and potent, it could lose some of its potential edge if each posts in line with expectations and negates the othersâ�,��"� impact.  As it stands, the growth forecast for the first quarter holds the only positive gleam, while the inflation and manufacturing gauges are looking at sizable contractions. 

Boris Schlossberg is a Senior Currency Strategist at FXCM.