Just take a look at the dollar index. It is finally back up above 84.00, a level it hasn't seen since the middle of last year.

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There are two key reasons why the market is going nuts for the dollar:

The job market, which the Fed is closely watching and is a vital factor in its monetary policy decisions, has been performing better than expected.

The non-farm payrolls in April surpassed expectations, printing a 165,000 net increase in jobs versus the 146,000 forecast. This news coincided nicely with an upward revision of March's lowly job gains of 88,000 to 138,000. The result of the strong hiring was an unexpected drop in the unemployment rate to 7.5% from 7.6%, taking joblessness one step closer to the Fed's target of 6.5%.

The improvements in the labor market seem to have carried over into the month of May as well, as evidenced by the 5-year low in unemployment claims that was posted just last week.

In other news, the retail sales report recorded a 0.1% rise in April. This may not sound like much until you compare it to the 0.3% decline that many had predicted. Seeing retail sales post another month of growth is quite uplifting because it's considered a key measure of consumer spending, which happens to account for around 70% of the U.S. economy.

Word on the street is that the Fed has already made plans to cut down its open-ended $85-billion-per-month asset purchase program. Who started the rumors? The Wall Street Journal! According to the WSJ, the central bankers are already talking about withdrawing stimulus, but it's still unclear as to when the tapering will begin.

So far, the markets seem to believe the report, and truth be told, I don't blame them! After all, the Fed has talked about the possibility of an early withdrawal of stimulus in the past. In fact, in the FOMC statement held at the start of the month, the Fed announced that it's ready to change up its pace of QE, depending on what the economy needs.

Furthermore, as I had just mentioned above, recent economic data seems to be supportive of the Fed's change in stance.

For now, the dollar's rally appears well-grounded and will be tough to derail. However, the many U.S. reports coming out over the next couple of days will probably play a critical role in dollar price action and could determine whether it stalls or surges to a new high.

If they print downside surprises, it would give mixed feedback on the U.S. economy and might cause the markets to reconsider their long-dollar positions. But if they print above expectations, it'll most likely clear the path for further gains for the dollar.

Retail sales reportedly grew 0.1%, opposite the 0.3% decline economists had initially expected. Meanwhile, the core version of the report that excludes automobile sales came in just as projected at -0.1%. The results were welcome improvements from the previous month's 0.5% and 0.4% declines in the headline and core reports, respectively.

These positive retail sales couldn't have come at a better time. The payroll tax, which is used to fund Social Security and Medicare, has recently been increased to 6.2% for people whose wages are above $113,700 per year. It was at this level two years ago, when it was slashed to 4.2% in an effort to resuscitate the weak U.S. economy.

Many economists thought that this would cut heavily into consumer spending as they predicted that consumers would instead choose to save more. However, it seems that just because taxes have been raised and their take-home pay is marginally lower, it doesn't necessarily mean that households would reduce spending.

Digging a little deeper, we can actually see that there are quite a few positive signs that the economy is picking up and that consumers can actually afford to open up their wallets a little bit.

For one, oil prices have been on a steady decline since the beginning of April. Average national prices dropped to $3.55 / gallon, after they fell by about 13 cents (3.5%) over the course of the month. To put this into perspective, this marked the largest one-month decline in over a DECADE, and actually translates to about an additional $13 billion of potential spending for average Joes like you and I. Boo yea!

Second, the labor market made a major comeback this past April, as the non-farm payroll employment report surprised to the upside. Moreover, weekly jobless claims continue to fall and are now at around 330,000, way off the 400,000 figures we have grown accustomed to over the past couple of years. As for weekly earnings, they've actually climbed to their highest level since October 2010 this past March.

Tying these all together, it's no surprise that consumers are growing more optimistic about the economy, as can be seen in the last Conference Board Consumer Confidence figure, which surprisingly jumped up to 68.1, its highest level since November 2012.

With consumer confidence on the rise and with the Fed still sticking to its ultra-accommodative monetary policies, the U.S. economy may be just one step away from a seriously bullish run. Watch out forex peeps, this may just be what the Greenback needs to be victorious during the second half of 2013!

However, this wasn't the case in the G7 summit held this past weekend. The meeting of the world's top nations actually produced quite a bit of volatility in the forex markets. Just take a look at the many weekend gaps that formed on the charts and you'll see exactly what I mean!

In a surprising turn of events, G7 finance ministers gave the rising U.S. dollar and falling Japanese yen their nod of approval. They seem to have no problem with the Bank of Japan (BOJ)'s super-easy monetary policy, saying that it's a-okay in their books since it's aimed at boosting the economy rather than directly weakening the yen.

But in every party is a party pooper. In the G7 summit, this role was played by Wolfgang Schäuble, Germany's finance minister. He was the only participant who thought twice about giving Japan the green light, as he feels that "the relatively high levels of liquidity" in the markets could pose risks to the global economy.

One can't help but wonder if Schäuble is merely protecting his own interests. After all, Germany is second only to China in global exports. It stands to suffer in the wake of a weaker yen, as it competes with Japan in many of its top exports (motor vehicles and machinery).

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As a result, USD/JPY finally made a clean break above the 100.00 barrier. As you can see in the weekly chart, it is currently edging close to the 102.00 major psychological handle - a level it hasn't reached since October 2008.

I don't know about you, but the G7 finance ministers seem to have given the green light that market participants have long been waiting for, paving the way for further yen weakness. They basically showed the market that they have a united front, which completely dissipated the fears of the "brewing" currency war. Hopefully, the G7 officials are right, and the BOJ's actions will eventually lead to a stronger and healthier Japanese economy.

Some of the world's major economies have been struggling, whether its a battle with rising employment rates, weakening exports, or keeping stagflation's ugly head from appearing. Consequently, this has convinced central banks all over the world to implement measures that weaken their currencies, in one way or another, to help encourage foreign investment, making exports more competitive, or to keep the price of goods and services balanced.

I know this isn't exactly shocking news. The Fed announced QE3 in September 2012, British central bankers have been engaging in asset purchases for a while now, and the SNB announced its peg on EUR/CHF last year.

However, a few more central banks joined in on the fun and have recently pulled off a few tactics too.

This year, it all started when the BOJ unleashed its aggressive monetary easing policy under BOJ Governor Kuroda. A month or so after, the ECB also eased its monetary policy by cutting its benchmark rate by 25 basis points. It was soon followed by the RBA which slashed rates below 3.00% for the first time in history to 2.75%. Meanwhile, the RBNZ admitted that it's been secretly selling the Kiwi, marking the central bank's first intervention since 2007.

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So what now?

It doesn't take Superman's X-ray vision to see that among the central banks listed, the BOC is the only one that isn't on the devaluation bandwagon. I couldn't help but think that maybe it's time to buy the Loonie.

What do you think?

Of course, I don't want to get ahead of myself and bet the farm on the comdoll. After all, Mark Carney will soon turn over his baton and Steve Poloz will become the next BOC Governor. For all we know, the new head honcho could turn out to be more dovish than Carney if domestic data starts to turn for the worse. It's also worth considering that it may only be a matter of time until the BOC reacts to the ongoing currency war and cuts rates to maintain or boost its export competitiveness too.

Still, I think it's worth everyone's while to remember that the BOC is one of the few major central banks that is not doing anything directly nor indirectly to weaken its currency.

Well, at least, not yet.

It all makes sense too. Expanding the quantitative easing program would only give minimal benefits to the economy but greatly increase the risk of higher inflation. The U.K.'s current inflation rate stands at 2.8%, 0.8% higher than its official inflation target of 2.0%. Besides that, analysts are saying that the certainty surrounding future monetary policy is giving a lot of confidence to businesses and households.

Granted it's still too early for the central bank to proclaim that sustainable recovery is happening, but the recent string of good economic data gives little reason for those who resisted further stimulus measures to change their stances.

As I've mentioned a few days ago, the country's GDP report for the first quarter showed that the economy grew 0.3%, which was notably higher than the 0.1% increase the market had initially expected. Moreover, the positive figure established that the U.K. didn't fall into another technical recession.

Leading indicators are also pointing to further growth. Below is a brief summary of the most recent PMI readings:

Even though both manufacturing and construction are still below 50.0 (the level that divides growth from expansion), they both came in much better than forecast. They were also significant improvements from the previous month's readings. The services sector, meanwhile, is healthily growing.

If there's any threat to the U.K.'s recovery, it will come from the outside rather than internally. The euro zone, which is the U.K.'s biggest export market, is expected to contract by 0.3% this year. This could negatively affect demand for U.K.'s exports and hurt the economy's growth.

Assuming good data continues to come in, the BOE will likely keep the current monetary policy in place until Mervyn King gets replaced by a potentially more dovish Mark Carney in July. That being said, next month's meeting (June) will probably be another non-event for the foreign exchange market.

It all started last Monday, when a Hong Kong based forex firm received a humungous ONE BILLION USD sell order on AUD/USD. The RBA rate statement was fast approaching and exchange rate at the time was around 1.0320.

Rumors soon circulated that Soros was behind the move, and that Soros was anticipating a rate cut by the RBA. Keep in mind that expectations were for rates to remain steady, and that if the central bank did indeed slash the benchmark interest rate, it would bring the rate down to its lowest level since the RBA's creation. Once word got around that Soros could potentially be behind the move, traders hopped on the bandwagon pretty quickly.

As you know by now, George Soros was right on the money, as the RBA decided to cut rates by 25 basis points due to the central bank's poor economic and inflation outlook. The RBA's benchmark interest rate now stands at 2.75%.

Adding to the intrigue of the deal, Soros apparently pulled off the deal three times with three different forex brokers, taking home a tidy profit of 19 million USD on each. For those of you who don't wanna do the math, that's a smooth 57 million USD!

AUD/USD: 4-hour

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Since the beginning of April, it's pretty clear that the pair has been trending lower. After touching 1.0580, it sold-off heavily, pulled back during the final weeks of the month, and then fell again to make a new 2-month low.

While we can never be absolutely certain where price is headed, based on Soros' bet and previous price action, it seems that the pair is poised to go lower. If major support at 1.0150 breaks, we could soon see AUD/USD back at parity!