Weekly Market Outlook Recap From Last Week The U.S. Dollar traded higher last week against all of the other major currencies, with the Greenback appreciating largely due to the continued uncertainty in the European Union over the troubled financial situations in Ireland, Portugal and Spain. Also adding to the U.S. Dollar's strength last week was a tense confrontation between North and South Korea which could develop into a regional conflict. Last week's Dollar rally was considerably more impressive than the Greenback's slightly higher performance the previous week as the situation in Ireland developed. The upward movement in the Greenback began with a major London clearing firm — LCH.Clearnet — doubling margin requirements for positions in Irish bonds by increasing them from 15 percent to 30 percent that provoked a bank run in Ireland. In addition to the European financial woes, last week saw the U.S. Dollar rise on increased risk aversion due largely to Tuesday's artillery fire by North Korea on South Korean territory that resulted in casualties. Traders worried that this could lead to an all out war between the two Asian countries and this prompted safe haven U.S. Dollar buying. The New Zealand Dollar was the biggest loser against the Greenback among all the major currency pairs, falling by -3.6 percent. The Kiwi was followed closely by the Euro which shed -3.3 percent while the Pound Sterling came off -2.5 percent against the Greenback. The other commodity dollars were also down — despite rising commodity prices last week — with the Australian Dollar losing -2.2 percent on the week. The Canadian Dollar was the best overall performer against the U.S. Dollar last week and only declined by -0.2 percent. The U.S. Dollar Index rose by +1.85 last week from 78.50 to 80.36, breaking the psychological 80.00 level and showing an impressive net gain of +2.36 percent on the week. The Dollar Index is now showing a net increase of +2.50 points or +3.21 percent for the year to date. The United States economic calendar was relatively sparse last week, with U.S. markets closed in observation of the Thanksgiving Day Bank Holiday last Thursday. Economic releases for the United States were mixed to somewhat weaker, with a bright spot being a better than expected rise in Preliminary GDP to +2.5 percent for the quarter. Among other positive U.S. economic numbers out last week was the University of Michigan's Consumer Sentiment indicator, out on Wednesday, which rose to 71.6 from 69.3, with an expected print of 69.5. Also out on Wednesday were Initial Jobless Claims that showed a favorable contraction to 407K newly unemployed versus the 434K expected. U.S. Dollar Gains on Risk Aversion and Korean Standoff The Greenback's sharp rise last week had a lot to do with the European financial crisis situation, with Ireland being the main focus of the European Union's current woes. Nevertheless, increasing concerns over the financial situation in Spain and Portugal also weighed heavily on the Euro and the Pound Sterling last week. Giving the U.S. Dollar additional upward momentum was the situation in North and South Korea which came to a head last Tuesday. According to reports, North Korea bombarded a small island called Yeonpyeong in the Yellow Sea which left four South Koreans dead, including two civilians. The belligerent act by North Korea sparked heavy buying in the U.S. Dollar, with many of the other major currencies making their weekly low prints versus the Greenback on Tuesday. The rest of the week saw the Greenback continue gaining ground against the other major currencies, bringing the U.S. Dollar Index — which was down just two weeks ago on the year — to show a gain of +3.21 percent for the year to date. The Japanese Yen was the second best performing currency after the Canadian Dollar, losing only -0.8 percent against the Greenback last week. The Yen's relatively strong performance last week was a bit surprising considering how Japan is particularly vulnerable with its proximity to the developing conflict in the Korean peninsula. Nevertheless, like the Greenback, the Yen tends to benefit from increasing risk aversion like that resulting from the Irish financial crisis. Risk Aversion Hits Commodity Currencies Despite Rising Commodity Prices The Greenback gained considerably against the commodity currencies, rising a whopping +3.6 percent against the New Zealand Dollar and an also impressive +2.2 percent against the Australian Dollar. Nevertheless, the Canadian Dollar — the best overall performer against the Greenback among the majors — lost only -0.2 percent. The commodity dollars declined despite the price of gold closing higher at $1,363.53 per ounce on Friday, up +0.8 percent on the week. Also, crude oil gained ground last week, closing at $83.76 per barrel, up +$2.25 per barrel or +2.76 percent and this rise helped support the Loonie. Furthermore, risk aversion due to the European financial crisis coupled with the possible war scenario developing among North and South Korea overrode most economic fundamental data seen last week, which were overall quite favorable to the commodity currencies. Weekly Recap and Outlook for the U.S. Financial Markets and Dollar – 11/29/2010 The U.S. Dollar gained considerable ground against all of the major currencies last week amid increasing uncertainty among investors over the Irish, Spanish and Portuguese financial situations in the European Union. The increased risk aversion was further exacerbated by increased aggression from North Korea against South Korea, which strengthened the Greenback considerably against all of the major currencies last week. Read full report Weekly Recap and Outlook for EURUSD – 11/29/2010 Last week's trading sessions saw EURUSD come off considerably after having closed the week before almost unchanged. The pair started the week off by gapping higher on Monday to make its weekly high of 1.3785 before then leading lower. The pair then fell sharply after Moody's Investor Services warned the market that it might have to make a multiple notch downgrade for Irish debt. The rating agency noted that the rescue package from the EU and the IMF would, "crystallize more bank-contingent liabilities on the government balance sheet, and increase the Irish sovereign's debt burden." Over the previous weekend, the Irish government had agreed to the joint EU/IMF bailout program, which is currently estimated to be between 80 and 100 Billion Euros. Read full report Weekly Recap and Outlook for GBPUSD – 11/29/2010 Last week's trading sessions saw GBPUSD give up considerable ground as investor risk aversion based on European financial concerns hurt the Pound, in addition to unrest among North and South Korea lending safe haven support to the U.S. Dollar. Read full report Weekly Recap and Outlook for AUDUSD – 11/29/2010 Last week's trading sessions saw AUDUSD fall sharply as the Aussie was hurt by increased risk aversion among international investors due to the worsening European financial crisis, and the U.S. Dollar benefitted from saber rattling among North and South Korea. Read full report Weekly Recap and Outlook for NZDUSD – 11/29/2010 Last week's trading sessions saw NZDUSD drop sharply on the back of a flight to quality that benefitted the U.S. Dollar after the previous week's modest rise. Read full report Weekly Recap and Outlook for USDJPY – 11/29/2010 ULast week's trading sessions saw USDJPY continue its rally on the back of growing risk aversion that permeated financial markets due to the Irish financial crisis and safe haven U.S. Dollar buying that emerged as the risk of armed conflict among North and South Korea increased. The week began on a relatively quiet note, with the USDJPY rate dropping somewhat initially as the Japanese observed their Labor Thanksgiving Day Bank Holiday on Monday. Read full report Weekly Recap and Outlook for USDCAD – 11/29/2010 Last week's trading sessions saw USDCAD trade in a volatile range as the U.S. Dollar benefitted somewhat from increased risk aversion and safe haven buying. Read full report | 
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