Will Dollar’s Rally Continue? It May

The US dollar has rallied last week and the rally was strong. Will the advance continue this week? Most analysts believe it will, but there may be obstacles for the currency.
The dollar was rising on positive macroeconomic data. Favorable reports fed speculations that the Federal Reserve is going to reduce the scale of its asset purchases. Smaller quantitative easing should be positive for the currency. Data is expected to be fairly good this week too, but not all of it. For example, analysts anticipated that inflation will decelerate 0.3 percent and unemployment claims are predicted to rise from 323,000 to 332,000.
The euro remained under pressure amid talks about negative deposit rates. Yet macroeconomic data is expected to be positive for the currency this week. Experts think that the German ZEW Economic Sentiment will rise from 36.3 to 39.5, while the decline of the eurozone economy should slow from 0.6 percent to just 0.1 percent.
The Great Britain pound has found strength as the UK economy was showing signs of recovery at last and this week traders may see more evidences of economic growth in the United Kingdom. Among other positive reports that are expected to be positive, jobless claims are expected to show a drop by 3,100 after demonstrating 7,000 in the previous reading.
As for the Japanese yen, there are not many reasons for the currency not to continue its drop versus the dollar. Sure, the Group of Seven showed their displeasure with Japan’s policies during the weekend, but nothing substantial was done and Japanese policy makers will likely continue to push the yen to the downside. Saying that, the sheer magnitude of the yen’s drop may cause the currency to consolidate for a time, but a drop to new lows is very probable.
Analysts were rather bullish on the dollar. The DailyFX said:

The safe-haven USD may rally further as sharp gains in FX volatility prices suggest the Dollar breakout is the â€œreal deal”.

Forex Crunch also predicted that the greenback will rise against most other currencies (except for the Canadian dollar).

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