Last week was not a good one for Euro, against the dollar. It started out quite promising, but went downhill from there…fast. This was more noticeable because other forex currency pairs did alright against the US Currency. Maybe not great, but at least we saw a mix.

The ECB have gotten themselves into a bit of a pickle. How did that happen? It’s quite interesting. Central Banks have characters. The character of a Central Bank is usually a derivative of the people who run it, along with the relative strength of the country’s currency, along with some spice. Well, it is well known that the European Central Bank is generally against dropping Interest rates to very low levels, if they can help it. They responded to this crisis by cutting rates, just like everybody else. However, they responded late. They came along kicking and screaming. Along the way they have often indicated their desire to maintain a strong euro. That desire seemed to stand, even as the pillars collapsed around them.

Well, now we have a rate decision approaching. Things are still not great. In fact, new data seems to indicate the Europe is still in dire straits. They need to do more. To that end The President of the ECB, Trichet, has shown (key here: actually spoken this aloud) a willingness to drop rates lower than 1.0%. This is unprecedented. Finally, they are coming to their senses! Great! Well not quite. You see, another big official also said pretty much the opposite in the news. The unwillingness to drop below 1.0.

What’s going on here? Is El-Presidente losing his grip? Where’s the unity? At least people knew what to expect before this. Now…well now there’s confusion. An incongrous message is put out there. The end result: The Euro is left with a four day losing streak against the dollar. This, when the others such as the pound and Commodity currencies were fighting back. With more negativity expected in the news this week, the ECB fellas will have to get their act together.

Things aren’t all rosy for the others either. The pound, though it fared better than it’s european cousin, also has it’s problems. There was no real news last week. That won’t be an issue this week. There’s plenty to go round. Some of it will be bad, and we will all see that, in spite of the optimism, we are not out of this yet. This should bode well for the US Dollar. Also, a major investment firm has boycotted bets that the Pound will continue gaining against the dollar since the pair failed to close above major resistance just above 1.5000. That will just add to negative pound sentiment.

All in all, it looks like a week for the dollar. Happy trading.

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