It seems that the main reason for the Dollar’s bullish trend is the positive data coming out of the U.S economy. The U.S Trade Balance, which measures the difference in value between imported and exported goods and services during October, came in at -32.9B. This result was much better than predicted, and far better than September’s result, -36.5B. This showed that the U.S export industry is beginning to recover, which strengthened the Dollar instantly. In addition, Retails Sales unexpectedly rose by 1.3% in November, beating expectations for a 0.6% rise. It seems that as long as positive figures continue to be published from the U.S economy, the Dollar will continue to soar.

Looking ahead to this week, the main news event is likely to be the Federal Funds Rate scheduled for Wednesday 19:15 GMT. The Federal Funds Rate is constitutes the U.S Interest Rates announcement for December. Current expectations are that the Federal Reserve (FED) will leave rates at the current level. However, if the Fed decides to surprise and hike rates, the potential exists for mayhem in the market.

The number of people in the U.S. receiving unemployment insurance continues to decline, dropping to the lowest level since February. The US trade Deficit also declined unexpectedly as a weak Dollar boosted exports oversees.

Looking ahead for today, the US Retail Sales is expected to be released at 13:30 GMT and the Prelim UoM Consumer Sentiment at 14:55 GMT. With mostly better than expected economic data seen lately from the U.S., worse than expected results might prove quite volatile for the USD pairs.

Set to be released at 13:30 GMT, the weekly U.S. unemployment claims report will be a telling statistic as to whether last weeks report was merely a fluke, or the American job market is really improving. If the number comes in at or around the forecasted 463K, the Dollar may make some gains, as the number is roughly the same as last weeks’. If the figure comes in at a significantly higher number, the Dollar could be pushed further down as this would signal the American economy is still not on stable ground.

Against the Yen, the U.S dollar fell half a percent to 89.01 yen. The Dollar hit a 14-year low of 84.82 yen at the end of November as worries about Dubai’s debt saw investors unwind risk trades funded in yen, which then sent dollar/yen down. Dollar gains were slowed down following a rally from late last week, when a surprisingly strong reading of U.S. employment had triggered some expectations the Fed may start to normalize ultra-easy monetary policy earlier than expected.

Gains in the U.S. currency were also tempered after Pacific Investment Management Co., which manages the world’s biggest bond fund, said that more USD weakness should be expected and declines in its value may help redress global economic imbalances and spur growth in the U.S. economy.

The remarks made by the Fed chief helped to boost the EUR/USD, ending a dollar rally that began on Friday after a better than expected U.S. Non-Farm Employment change. Friday’s significant drop in the pair’s rate required many traders to abandon their long positions in the pair, adding significant momentum to the downward price move. However, today the long term upward trend was seen as the EUR climbed against the dollar.

The pair is currently trading at 1.4840 after floating just below the 1.4800 prior to Bernanke’s speech. Earlier in the day the EUR/USD was trading at its lowest level in the previous five weeks. The Pound also fell against the dollar, trading at 1.6452, down from an opening price of 1.6476.

The Canadian Dollar will come into focus during today’s trading. The Bank of Canada will announce its decision on the overnight rate which is not expected to change, along with the release of the accompanying rate statement. The explanation may contain hints at the future direction of Canadian monetary policy. A dovish tone in the rate statement may continue to push the USD/CAD lower towards the 1.0400 level today.

Until Friday, the Dollar continued with its bearish trend due to the negative figures from the U.S economy. The Manufacturing Purchasing Managers’ Index dropped to 53.6 points from 55.7 in October. In addition, the ADP forecast for November’s Employment Change was quite gloomy. The estimate was that another 169,000 people have joined the unemployment circle in the U.S. The unsatisfying figures continued to weaken the Dollar.
However, the Non-Farm Employment Change result on Friday has put an end to the bearish trend. The end result showed that the payrolls on the U.S have declined by merely 11,000 in November, the best figures since the recession began. In addition, the Unemployment Rate has unexpectedly dropped from 10.2% to 10.0%. This result was truly unexpected, especially due to the former ADP forecast, boosting the Dollar as a result.

Looking ahead to this week, a lot of interesting data is expected from the U.S economy. Traders are advised to pay special attention to two major publications: The Trade Balance on Thursday and the Retails Sales reports on Friday. A continuation of positive figures has the potential to further boost the Dollar. In addition, traders should also follow Fed Chairman Bernanke’s speech today. Bernanke is expected to refer to the economy’s outlook, which could create volatility in the market.

Economic data was mixed on Thursday as new applications for U.S. jobless benefits unexpectedly fell last week to the lowest level in more than 14 months, suggesting a labor market edging toward stability, while productivity was less robust in the third quarter. Economic recovery does not appear to be improving at the speed many investors were hoping for, and currencies appear to be tracing the movement of stocks as a result. While recovery floats between positive and negative economic data, risk appetite may be suffering as a result.

Looking ahead today, the news event that may have a very large impact on the Dollar and its main currency pairs in today’s trading is Non-Farm- Employment Change around 13:30 GMT. This report is very important as likely to Impact the dollar volatility. Traders should pay close attention to the market as there is an opportunity for traders to capitalize on the fluctuations which are likely to follow this release.

There are a number of news events today that could impact the USD in trading. Set to be released at 13:30 GMT, this week’s unemployment claims could prove beneficial for the Dollar if the forecasted number of 479K is true. This would represent an increase over the figure from last week, and could cause investors to rally around the safe haven Dollar. Traders may also want to pay attention to the ISM Non-Manufacturing PMI, set to be released at 15:00 GMT. The report is a survey of several hundred purchasing managers, and is a good indicator of how businesses are performing in the U.S. If the report comes in as predicted at around 51.6, the Dollar could suffer, as this figure would mean that American businesses are performing well.
This may lead to increased risk taking among investors.

The greenback declined for a 2nd day against the EUR as U.S. stock gains followed advances in Europe. The Dollar also declined against the Australian and New Zealand currencies as investors shunned the low-yielding currency in favor of higher-yielding assets for a 2nd straight session. Still, the greenback advanced versus the Japanese yen after the Bank of Japan announced more loans for banks to fight off deflationary pressures. The USD stood at 86.61 yen, having retreated from a high of 87.53, with traders expecting it to hold below the 87 yen mark.

The U.S. dollar also remained lower after the Institute for Supply Management said its manufacturing index fell to 53.6 in November from 55.7 the previous month, dropping far more than economists predicted. The U.S dollar may extend its decline against most major currencies after U.S. pending home resales unexpectedly rose and Dubai World said its debt talks are constructive adding to demand for higher-yielding assets.

Investors also appeared hesitant ahead of this week’s U.S. and Euro-Zone economic data as well as interest-rate decisions by several major central banks, therefore limiting their risky positions. Throughout the economic crisis, the U.S. Dollar has tended to fall on improved economic outlook and equity gains. The Federal Reserve’s policy of near-zero interest rates has which the U.S. Dollar one of the lowest yielding currencies in the world also adds to the negative pressure on the Dollar against riskier, higher yielding currencies such as the EUR. Giving a lift to sentiment Monday and weighing on the USD, the Chicago PMI showed more businesses in the Chicago region were expanding in November. The business activity index rose to 56.1% this month, the highest since August 2008.

Looking ahead to today investors should follow the release of the ISM Manufacturing PMI and Pending Home Sales due to be released at 15:00 GMT. A continuation of the optimistic data will likely continue putting pressure on the greenback.