Thanks to an unsettled Federal government budget, the momentum behind the Euro, fueled by the rate hike this week, kept going, instead of turning around just after the rate hike was announced. The Euro has broken its larger downtrend and could keep heading higher.

However, there is some talk of the Fed ending QE2, and as mentioned here previously, that could be confirmed at end of this month. That might be enough to trigger a dollar rally. Another factor is that the bailout for Portugal could turn ugly, with numerous arguments breaking out in the coming weeks. Here is a detailed look at that situation:

[1] http://www.dailyfx.com/forex/fundamental/forecast/weekly/eur/2011/04/09/Euro_Rally_Looks_to_Portugal_Bailout_Talks_for_Added_Fuel.html

What if the US governement announces a budget agreement early next week? Possibly that could trigger a knee-jerk bounce in the dollar. That could affect currency pairs but it’s not clear how much effect that would have on gold and silver. If equities rally, the effect could be muted. For now, the breakout in gold is strong and gathering momentum. But there could be some sensitivity to the dollar based on assumptions about its long-term trend. Next week could be volatile, and then end of this month could be significant.