Dollar Mixed in Light Overnight Trading

The U.S. Dollar traded mixed overnight in light trading ahead of today’s FOMC announcement. Traders are looking for the Fed to leave interest rates unchanged and to let the asset-buyback program to conclude in September as originally projected.

The U.S. Dollar traded mixed overnight in light trading ahead of today’s FOMC announcement. Traders are looking for the Fed to leave interest rates unchanged and to let the asset-buyback program to conclude in September as originally projected. Traders will be looking for language regarding the current state of the economy and the possible announcement of an exit strategy from the current easy money policy. The surprise that could move the market will be an extension of the quantitative easing program.

This morning the trade deficit came out close to the forecast. Traders did not react to the number very much with the Dollar continuing to trade mixed.

The GBP USD is trading under some light selling pressure. The fundamentals and the chart pattern support a decline but traders will allow the Fed announcement to trigger the next move. The Bank of England’s announcement to expand its asset buyback program is the catalyst for the recent weakness.

Bearish EUR USD traders want to see more evidence that the U.S. economy is on a faster pace to recover from the recession before the Euro Zone. Weakness has been developing in the Euro since the release of the U.S. employment data on August 7th.

A weaker stock market is likely to trigger more buying in the Japanese Yen as Japanese investors repatriate funds. Investors who borrowed Yen to buy equities are also selling stocks to payback loans. These events are putting selling pressure on the USD JPY.

Traders are continuing to punish the Canadian Dollar. Last week’s bearish Canadian unemployment number has caused investors to take a harder look at the Canadian economy to find a reason to justify the recent break in the USD CAD. Speculation that the U.S. economy is on a path to recovery at a faster pace than Canada is triggering the current rally along with weaker crude oil and equity markets.

Higher yielding currency traders will be watching the movement in the equity markets today before the Fed announcement. Stock market investors are beginning to question valuations at current levels. Many feel that stock prices are way ahead of earnings. This could trigger a price adjustment to the downside which could pressure the AUD USD and NZD USD. Traders will be watching the Fed to see if they offer any evidence that the U.S. economy is on the path to recovery. This could trigger additional selling pressure especially if the Fed hints at raising interest rates sooner than expected.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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