AN EXCITING week. Having fallen substantially by mid-week, the US dollar turned around and moved up sharply - some four pfennigs and three yen. This surprised some people, since the mood had been so bearish, so why the rally? On this typhoon-prone holiday weekend, we might take a look at the reasons. Basically, when everybody who wants to sell something has sold it, there is nothing more to drive it lower, and so it must go up. Conversely, when everyone has finished buying, the price must go down. This is the condition which we hear described as ''overbought'' or ''oversold''. Great terms, but how to quantify them? The answer is the relative strength indicator (RSI). This can be established over a period of time by comparing the number of ''up'' days against ''down'' days. This will then give us a ratio: over 0.7, things are overbought; below 0.3, they are oversold. In fact, by the middle of the week, the dollar's RSI was down to 0.28, which meant it more or less had to go up. A suggestion of a US-Japan trade deal, and a rally ensued, and this was boosted on Friday by positive US economic news, and stories that the big players were buying dollars against yen and deutschmarks. The economic news suggested that the United States Federal Reserve Board had inflation under control, and this should suck in funds to the US for stock and bond investment. This week will see the Bundesbank Council meeting, which is unlikely to produce much drama, and the US non-farm payroll figures. However, with holidays in Hong Kong, the US and Britain next week, things should trade quietly. Expect, however, to see the greenback hang on to most of its recent gains and build a base. Sterling should continue to trade in no-man's land, half following the deutschmark and half the dollar. The Canadian dollar should stay firm, as some of the wilder fears about the Quebec elections ease off. Watch out for the Australian dollar, however. Technically it is looking a little stretched, and could easily lose a point or two in the near future. Bob Bunker is general manager of BNP International Financial Services (HK) Ltd.