The Greenback Starts the Week With a Sharp Drop

EUR/USD Now Trades Around 1.4220

The greenback was trading in a wide range last week, and started to show some positive momentum towards the end of the week. On many occasions we saw the USD showing massive volatility and price action due to several important news events such as the US Retail Sales which showed a figure of 0.6% after consensus of 0.3%. The US PPI also helped to push the greenback a bit up as it went out of negative territory of -1.4% and jumped to 1.1% which was even higher than the expected 0.5%. The sweet taste of positive news was damaged with the release of the Consumer Sentiment that dropped from 83.4 to 82.0 and was expected to rise to 84. The general USD situation is causing the Feds to rethink whether they will hike the rates one more time this month, and if indeed a hike will occur, than it will be a 0.25 hike and not 0.5 like September.

As for today, traders are expecting the Empire State Business Conditions Index to be released at 12:30 GMT. The Index Measures the general business conditions of manufacturers in New York State and is concidered to be quite important in the manufacturing sector. The forecast for the index is a slight decrease from 14.7 to 13.0.
Later today, at 23:00 GMT Federal Reserve Chairman Ben Bernanke will speak about the economic outlook at the Economic Club of New York, and will probably cause some choppy price movement arount the time of the speach.

The rest of the week will be relatively packed with major news events such as the TIC Net Long-Term Transactions, Industrial Production, CPI, Housing Starts, and Building Permits. All those will determine whether the USD will continue the positive momentum it started last week, or that will will see the weakening rally continue.