Surprise Drop in Crude Inventories Fuels EUR USD Rally

An unexpected drop in crude oil inventories send energy prices surging to the upside taking along with it U.S. equity markets and commodity markets while triggering a break in the U.S. Dollar.

An unexpected drop in crude oil inventories send energy prices surging to the upside taking along with it U.S. equity markets and commodity markets while triggering a break in the U.S. Dollar. The biggest gainer this morning was the EUR USD.

The EUR USD rallied sharply higher following the release of bullish EIA data which showed that crude stocks fell by 8.4 million barrels to 343.6 million barrels. This move renewed demand for higher risk assets and ignited talk of inflation, thereby weakening the U.S. Dollar. The Euro is trading inside of a range of 1.4447 to 1.4086 for the month. Today’s rally is currently testing a key retracement zone at 1.4246 to 1.4293.

The GBP USD reversed an early morning downtrend and is now trading higher for the day. Early in the trading session the British Pound was trading sharply lower because of a negative interpretation of the minutes from the last Bank of England meeting. The shift in sentiment was triggered by the surprise drop in crude oil inventories. The daily chart indicates this currency pair may retrace to 1.6658 to 1.6749.

Surging crude oil and equity markets helped reverse the early session uptrend in the USD CAD. The charts indicate a break to 1.0877 to 1.0819 is likely given the building downside momentum.

The reversal in equity and commodity markets this morning is leading to greater demand for higher yielding assets which is triggering rallies in both the AUD USD and NZD USD. The Australian Dollar is currently poised to retrace to .8316 to .8354. The short-term break to .6641 following a top at .6884 indicates a possible retracement in the New Zealand Dollar to .6792 to .6791.

Although talk is circulating that the Swiss National Bank is poised to take action to stem the rise in its currencies the USD CHF is plunging today. Recently this market had been trading inside of a tight and narrow range but today’s action has triggered a breakdown to the downside which could mean a test of 1.0563 is possible over the short-run.

The stronger move in the equity markets is failing to ignite interest in the carry trade as the Japanese Yen is trading higher on the day. This could indicate that the rally in equities is short-covering rather than fresh buying.

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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