The U.S. Dollar is called weaker this morning. An equity market rallyin China has helped boost demand for higher risk assets overnight. Bothtechnical and fundamental factors are helping to contribute to theweakness in the Dollar.
The U.S. Dollar is called weaker this morning. An equity market rally in China has helped boost demand for higher risk assets overnight. Both technical and fundamental factors are helping to contribute to the weakness in the Dollar.
The GBP USD confirmed yesterday’s closing price reversal bottom with a follow-through rally overnight. Yesterday’s bottom and strong move to the upside was triggered by a better-than-expected U.K. Services Report which showed its biggest jump in 2 years. This bullish news was a sign that the U.K. economy was beginning to recover from the recession. Shorts covered on the news while driving the market into a minor resistance area at 1.6369 to 1.6430. Oversold technical conditions also helped boost prices.
Resistance could develop today between 1.6369 to 1.6430. A close over 1.6430 sets up this market for a further rally to 1.6577. The main trend remains down until 1.6627 is taken out. Although the U.K. economy has been showing signs of improvement lately, traders expect a sideways market to develop as we get closer to the next Bank of England meeting scheduled for September 10th.
This morning the European Central Bank announced that its benchmark interest rate will remain at 1.0%. This was expected by traders despite recent reports showing improvements in the Euro Zone economy.
Traders expect ECB President Trichet to remain skeptical about the strength of the recovery in the Euro Zone when he comments on the economy later this morning. Although there have been signs of an economic recovery in some sectors, the ECB is still worried about high unemployment, low consumer spending and the growth rate which is currently under the target of about 2.0%.
The EUR USD remains inside of its August range of 1.4449 to 1.4045. The support area is the 50% zone of this range at 1.4247.
The firmer global equity markets are helping to put pressure on the Japanese Yen overnight. Overbought technical factors are also helping to contribute to the weakness. The recent rise in the Yen is a sign that traders have adopted this currency as the new safe haven market.
Higher energy and stock prices could give a boost to the Canadian Dollar today. Oversold technical factors could help contribute to the rally by encouraging shorts to cover their positions.
Trading ranges may tighten up later in the day as traders begin to even positions ahead of tomorrow’s U.S. Non-Farm Payrolls Report.