Dollar Up on Positioning Evening Ahead of U.S. ISM Report

Lower equity markets are once again triggering an aversion to risk overnight boosting demand for the U.S. Dollar. Some of the selling pressure could be coming from investors lightening up positions ahead of today’s important U.S. manufacturing report known as the ISM Index.

Lower equity markets are once again triggering an aversion to risk overnight boosting demand for the U.S. Dollar. Some of the selling pressure could be coming from investors lightening up positions ahead of today’s important U.S. manufacturing report known as the ISM Index.

The key currency market drive will be the ISM Index. Investors want to see this report clear the 50% hurdle which would indicate the economy has made a serious turn toward recovery. Last month the report came in at 48.9%. Pre-report estimates are for this month’s report to show the index at 50.5%.

The EUR USD is trading lower this morning despite a government report that showed German unemployment fell in August. Some traders feel the report showed a one-time event that skewed the results.

U.K. manufacturing unexpectedly fell to 49.7 in August from 50.2 in July. This news weakened the GBP USD as it showed more evidence that the economy was still contracting.

Although it spiked up overnight for a short-time, the Canadian Dollar settled back into yesterday’s range as buying dried up. Falling equity and crude oil prices weighed heavily on this market yesterday. This trend is likely to continue today if the same conditions exist

Lower equity prices in China and the U.S. as well as an election victory by the opposition party helped the Japanese Yen maintain its strong uptrend. Overnight the Yen is trading flat despite less demand for higher risk assets. This is most likely because of positioning evening ahead of this morning’s U.S. ISM Report.

The Swiss Franc continued to trade inside of its 90-day range in spite of news that the economy contracted less than economists forecast in the second quarter. This news should be interpreted as another sign the European economy is beginning to recover.

The AUD USD could feel selling pressure today after the Reserve Bank of Australia voted to leave interest rates unchanged. The less hawkish comments from the RBA could encourage selling if traders interpret this as a sign that rates will rise later in the year rather than sooner.

An increase in Chinese manufacturing helped support the NZD USD early in the trading session, but the market quickly turned down when global equity markets began to weaken. This market is likely to take direction from the stock markets today.

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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