Dollar

At the same time the gold price is climbing, we observe also strength in the dollar. Sentiment is bearish, but the odds favor more and more the other way.
Everybody thinks the dollar is doomed. However, if the whole planet looks in one direction, the trade is done at the opposite side.

Look to this chart and the wedge.

We like the PowerShares US Dollor Index Bullish Fund ETF (ticker: UUP) tracking the performance of the US Dollar index as a tool to play an eventual break out.

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A lot is going on

There is a lot going on for the moment.
Most important things: month-end flows have triggered a wave of dollar buying. One of the reasons could be the FX-flows from equity fund managers due to the MSCI rebalancing exercise scheduled for tomorrow. 78 securities will be added and 99 will be deleted from the MSCI Global Standard Indices.

From the Washington Post: "Senior administration officials are considering the creation of a single agency to regulate the banking industry, replacing a patchwork of agencies that failed to prevent banks from falling into the worst financial crisis since the Great Depression, sources said. The agency would be a key element in the administration's sweeping overhaul of financial regulation, which officials hope to unveil in coming weeks, including the creation of a new authority to police risks to the financial system as well as a new agency to protect consumers, according to three people familiar with the matter. Most of the proposals would require legislation. The powers would include oversight of previously unregulated markets, such as the derivatives trade, and of market participants such as hedge funds. "

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The EUR/USD and ZAR

Thank you, Goldman Sachs for informing us about the development of two trends in the FX universe.
Hedge funds are positioning themselves to short the dollar. Not surprisingly especially in EUR/USD. And some flows were directed by these hedge funds to non-Japan Asian currencies as the CNY, HKD en INR (China, Hong Kong and India).

And than there was this piece of news from Reuters:

(Reuters) - British mobile phone giant Vodafone (VOD.L) has already brought 20.5 billion rand ($2.38 billion) into South Africa to buy a 15 percent stake in local operator Vodacom, the latter's lawyer said on Sunday.
With unions trying to block the deal with a last-minute legal injunction, the Vodacom lawyer said the money arrived on May 7 and the rand would fall if it had to be repatriated.

We know in the mean time that green light was given by the Pretoria High Court and Vodacom , de biggest listing on the JSE this year, started trading. So the shorters of the ZAR last week, have to cover their positions as the 20 bln ZAR will not be repatriated.

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EUR/USD

There is a technical event in the FX-markets. For the first time since 2005 the EUR/USD is moving above its 200 day moving average. Will the dollar lose more the coming months? Those caught long on the dollar will become quite nervous.

Hey boys and girls out there, it was another eventful week: time to close shop and to go down to the pub for a good pint of Guinness. Cheers to everybody and enjoy your weekend.

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