Euro Erasing Overnight Gains Prior to U.S. Opening

The U.S. Dollar is expected to open stronger this morning based on a slow overnight trade. For most of the session the Dollar was trading mixed.

The U.S. Dollar is expected to open stronger this morning based on a slow overnight trade. For most of the session the Dollar was trading mixed.

Overnight the German Business Confidence Index was reported stronger than expected. This is still another sign that an economic recovery is on the way. Nonetheless, the ECB remains skeptical about the economic outlook. Traders may be taking a wait-and-see attitude toward the Euro until after the next ECB meeting on September 3rd. Investors are anxious to find out if the ECB will discuss withdrawing economic stimulus now that the economy is showing signs of recovery. After an initial surge to the upside, the Euro has given back all of its overnight gains prior to the U.S. Forex Opening.

The combination of lower oil prices and the comments from a Bank of Canada official are helping to put pressure on the Canadian Dollar overnight. A drop in U.S. equity markets may pressure this currency even further.

The GBP USD is under pressure again this morning. The poor economy is leading traders to believe the U.K. will lag the U.S. during the economic recovery. The technical picture is also weakening on the charts.

Look for weakness to develop in the USD JPY if U.S. equity markets break hard. Evidence is mounting that Japanese investors are repatriating their funds due to weakness in U.S. and Asian equity markets.

Demand for higher yielding assets may also drop today if the U.S. equity markets weaken. Recently the AUD USD and NZD USD have been showing signs of diverging from the U.S. stock markets. This could be indicating that a hard correction is inevitable.

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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