U.S. Dollar Pares Gains into Close

The U.S. Dollar traded sharply higher against most major foreign currencies before giving back some of the gains into the close. Today’s bullishness for the Dollar was set off by an early morning report that showed U.S. consumer sentiment had declined from the last month. Coupled with yesterday’s poor U.S. Retail Sales Report, investors now believe the recovery in the U.S. economy will not be as robust as previously thought

The U.S. Dollar traded sharply higher against most major foreign currencies before giving back some of the gains into the close. Today’s bullishness for the Dollar was set off by an early morning report that showed U.S. consumer sentiment had declined from the last month. Coupled with yesterday’s poor U.S. Retail Sales Report, investors now believe the recovery in the U.S. economy will not be as robust as previously thought.

Today’s bearish report triggered a flight-to-lower yielding currencies and less demand for higher risk assets. This led to a hard sell-off in the equity markets early in the trading session. The USD JPY lost ground on Friday and for the week as Japanese investors repatriated their funds. Earlier in the week there was speculation that the Japanese were bringing home Treasury redemptions. Today these investors were taking money out of the stock market and reinvesting in lower yielding assets in Japan.

The GBP USD finished lower for the week. The British Pound is still feeling downside pressure from last week’s announcement to increase the amount of funds available for quantitative easing.

The EUR USD managed to close up for the week, but the chart pattern indicates more downside to follow. Last week’s technical reversal top was confirmed this week indicating the start of a two to three week break. This week’s news that the Euro Zone GDP was better than expected was not strong enough to sustain a mid-week rally. This indicates that investors do not have confidence in the Euro Zone mounting a recovery before the U.S. economy.

Weakness in the equity and energy markets along with a bullish technical pattern on the weekly chart helped the USD CAD gain this week. The Canadian Dollar should feel more downside pressure next week if demand for higher risk assets continues to wane. In addition, last week’s unexpected drop in Canadian unemployment is still casting a bearish tone on the economy.

Despite positive commentary from Reserve Bank of Australia Governor Stevens regarding the economy, the AUD USD was unable to follow-through on an upside breakout through last week’s high. Governor Stevens implied that the economy was strong enough to consider hiking interest rates. Technically, this market posted a weekly closing price reversal top which is a strong signal for the start of a 2-3 week break.

The NZD USD was able to post a new high for the year and close lower for the week. The pressure will be on this market if demand for higher yielding assets drops next week. Technically this market is still in an uptrend so trying to pick at top at current levels is still risky.

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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