It was a surprising time for the US Dollar with a very mixed bag of data released last week. On Tuesday Ben Bernanke amazed greenback bears by coming out with one of the most openly pro-dollar speeches by any Fed chairman in a very long time (increasing thoughts that the Fed will hold their rates at 2%) although there is now speculation that Bernanke’s comments early last week were designed to protect the dollar from hawkish comments due from the ECB later that week.

On Friday everyone was shocked by the massive rise in the unemployment rate which spiked from 5.1% to 5.5% in one month. This meant that there was a complete turnaround in the dollar's fortune, causing the cross to spike to 1.9848.

The sharp rise in unemployment is likely to have a very negative impact on the psyche of the US consumer as most are keenly aware of the direction the unemployment rate is heading, the wrong one! This is the most recent signal that US growth is stalling and companies are more reluctant to hire as profits are squeezed by a consumer slowdown and soaring oil and raw material costs. The next key data point for the US economy will be Retail Sales due Thursday June 12th. Given the fact that employment has suffered its fifth consecutive month of losses, the US consumer is likely to cut down on spending.

The one bright spot on the US calendar may be the Trade Balance data. Although it is forecast to print worse than last month, the favorable exchange rate could create an upside surprise in both exports and imports, but the help to the greenback is likely to be minimal as fears of a much more severe downturn in the US economy is constantly in the forefront of the market’s mind.

We are expecting the cross to remain rangebound between 1.935 and 1.985 for the time being.