The dollar may rise next week after the greenback fought off new lows against the euro in the wake of two deep Fed rate cuts and dour economic data. Analysts said there were signs that dollar bears were starting to throw in the towel in the face the US currency's resilience.
A light data week awaits investors, but the Institute for Supply Management's (ISM) services report could provide more clues on the extent of the country's economic slowdown.
"At this stage, it looks as if the downside for the dollar is going to be limited," said David Powell, currency strategist at IDEAglobal in New York. "If this news (jobs report and the Fed's aggressive rate cuts) was unable to force euro/dollar to retest the all-time high, what will?"
The euro briefly surged to a two-month high of $1.4952 on Friday on news that US employers cut payrolls for the first time in 4-1/2 years in January, but failed to retest an all-time high of $1.4966 touched in November. It later gave up gains to trade lower around $1.4813.
The ISM services report due on Tuesday is forecast to show a reading of 53 in January, slightly down from 54.4 in December, according to a Reuters poll. Other reports due include the weekly jobless claims, December's pending home sales and fourth-quarter productivity.
Several Fed speakers take the podium next week, but analysts do not expect them to sing a different tune from Chairman Ben Bernanke who has said the central bank does not forecast a recession.
"They will take a more balanced tone and indicate they are prepared to ease further if the data requires it. You are going to see a fair amount of cheerleading coming out of the Fed speakers, they are not forecasting a recession," said Brian Dolan, chief FX strategist at Forex.com in Bedminster, New Jersey.
Speakers include Dallas Federal Reserve President Richard Fisher who dissented in this week's half percentage point cut in the fed funds rate target to 3 percent. Analysts reckon Fisher could shed more light on his decision. Investors will also watch the outcome of policy meetings of the European Central Bank (ECB), the Bank of England (BoE) and the Reserve Bank of Australia (RBA).