Euro Manages to Hold on to its Gains

The EUR USD managed to hold on to its overnight gains despite bullish comments from Fed Chairman Bernanke that boosted the U.S. Dollar.

The EUR USD managed to hold on to its overnight gains despite bullish comments from Fed Chairman Bernanke that boosted the U.S. Dollar. Early in today’s trading session the Euro rallied sharply higher following the release of better than expected economic reports from France and Germany. The reports unexpectedly showed improvements in French manufacturing and German services. The Euro was trading firm at the New York opening but positive comments from Bernanke regarding the recovery in the global economic community helped the U.S. Dollar improve, thereby limiting gains in the Euro.

Bernanke’s comments also helped pressure the GBP USD. The British Pound opened the New York session a little better on the bullish news out of Europe, but gains were erased after Bernanke’s comments. Fundamentally this currency pair remains weak because of the growing U.K. deficit and expansion of the Bank of England’s quantitative easing program. Traders want to see an improvement in the U.K. economy before committing to the long side.

The USD JPY reversed early morning losses to post a gain at the close of the session. Overnight the Japanese Yen was trading higher because of the reversal of the carry trade following weakness in Asian stock markets. The surge in U.S. equity markets and the thought of an economic recovery in the U.S. encouraged traders to buy the Dollar and sell the Yen throughout today’s session. Technically this currency pair formed a closing price reversal bottom which could lead to a follow-through rally next week.

Strong equity and energy markets helped weaken the USD CAD on Friday. The hard break in this market helped to turn the main trend back down after an almost two week rally. Although this market is reacting to greater demand for higher yielding assets, traders are going to want to see improvements in the Canadian economy or the current strength in the Canadian Dollar will not be sustained.

The AUD USD and NZD USD rallied sharply higher although both markets did not take out their respective highs for the year despite the huge rally in U.S. equity markets. Based on the upside momentum, this will probably take place next week. Gains could be limited if economic conditions in China don’t start to show signs of improvement. Traders are concerned that a tightening of liquidity by the Chinese central bank will stymie the economy and curb demand for Australian and New Zealand exports.

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