Forex: Monday’s review

Yesterday the dollar Index fell to a one-week low as traders sold the U.S. currency in favor of the Swiss franc, triggering automatic sell orders for the pair that further weighed on the greenback.

The 17-nation euro also rose against the dollar as it broke through its 100-day moving average, a technical level that once breached, may spur further appreciation. The shared currency earlier fell against most of its major counterparts before a report forecast to show a contraction in industrial output. The euro weakened earlier after International Monetary Fund Managing Director Christine Lagarde urged policy makers to be vigilant about global economic stability. Lagarde, speaking in Beijing yesterday, said oil prices, debt levels, and the risk of slowing growth in emerging markets threaten global economic stability.

The U.S. currency pared losses against the yen. The dollar’s 14-day relative strength index against the Japanese currency was at 71.8, more than the 70 level some traders see as a sign an asset may reverse direction.

EUR/USD: yesterday the pair gain, fixed above $1.3200.

GBP/USD: yesterday the pair rose to $1.5900.

USD/JPY: yesterday the pair fell, touched Y83.00.

In the UK, at 0930GMT, inflation data is due. The January 2011 VAT hike clearly had a sharp upward effect on inflation that month, with

National Statistics' assessment that it added 0.76 percentage point to the 12 month CPI rate, and there is evidence some retailers staggered  some of the rise into February. US data starts at 1145GMT with the weekly ICSC-Goldman Store Sales data, which is followed at 1230GMT by Housing Starts and at 1255GMT by the weekly Johnson Redbook Chain Store Sales.