This week, The US dollar continued to loss ground to the euro, and pound, as well as to the JPY, which competes with the USD for risk-aversion-based flow. The commodity currencies such as AUD and CAD also gained on the greenback. Even gold, which has been declining is gaining again. It appears the dollar is sliding across the board. Let's review the technical developments for this week.

HIGHLIGHTS OF THE WEEK

• A slew of positive macroeconomic data across Europe lifted market sentiment, underpinning the euro
• European financial stocks were up sharply and sovereign debt spreads narrowed significantly
• U.S. second quarter real GDP came in to the downside of expectations at 2.4% (annualized). Downward revisions to past growth show a deeper recession than previously thought with a peak-to-trough decline of -4.1%.
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U.S. Review

The Second Quarter Ended on a Soft Note

• Real GDP grew at a 2.4 percent annual rate during the second quarter, but recent data suggest the period ended on a weak note and point to a slower second half of 2010.
• New home sales rose in June, but downward revisions to April and May data show an even larger pullback following the end of homebuyer tax incentives.
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Market Outlook

Tactical view:

= PMIs to test bullish GBP/USD trend, GBP/CAD target 1.65

Dollar weakness coloured G10 fx markets in July but a stabilisation in speculative positioning begs the question if the currency is due for some reprieve in August.

A weak and weakening American economy has undermined the strength of the dollar for the entire month of July and this week's economic information provided no relief for the US currency. Since Monday the greenback has declined more than 1% versus the euro, 1.9% against the sterling, 1.1% for the Aussie. Only the Canadian Dollar, tied by economic proximity to the US economy and the Japanese Yen, embedded in its own economic morass, were relatively unchanged in the general US decline.