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The U.S. Dollar Index finished the week near its high after sharp breaks in the British Pound and Euro drove it sharply higher on Friday. The close above a retracement zone by the Dollar puts it in a position to challenge the high for the year at 81.70. It was a volatile week for the Dollar. The first half of the week saw the Dollar receiving selling pressure because of the prospect of lower interest rates for a prolonged period. The Dollar posted a strong gain during the second half of the week as renewed risk aversion sentiment encouraged traders to dump higher yielding currencies.

The British Pound was under pressure on Friday as traders took defensive positions out of fear of a double-dip recession in the U.K. Earlier in the week, the GBP USD ran into a resistance zone at 1.5297 to 1.5419. The trend remained down despite the spike higher and selling resumed following a test of this zone. On Friday this market tested the retracement zone formed by the 1.4780 to 1.5381 swing. This zone is 1.5080 to 1.5010. If a secondary higher bottom is going to form, it will do so in this zone. Otherwise a break under 1.5010 will put his market in a weak position.

The EUR USD turned the main trend down on the daily chart following a break through the recent swing bottom at 1.3530. In addition, a retracement zone at 1.3628 to 1.3584 was violated. Downside momentum is building which could take this market back down to the low for the year at 1.3440. Short interest in the commitment of traders report is still large which is contributing to the pressure. Without a Greek/European Union bailout package in place, the fundamentals remain bearish.

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