King Comments Pressure British Pound

Overnight the U.S. Dollar is trading mixed against most major currency pairs. There does seem to be some interest in the long side of the higher yielding EUR USD, AUD USD and NZD USD.

Overnight the U.S. Dollar is trading mixed against most major currency pairs. There does seem to be some interest in the long side of the higher yielding EUR USD, AUD USD and NZD USD. The USD JPY is showing weakness while the GBP USD remains in a down trend.

The Group of 20 meeting begins today. Among the topics which may be discussed include the possible trade war brewing between the U.S. and China, the Dollar’s value as a reserve currency and position limits on financial market speculation.

Yesterday, the Fed FOMC left interest rates at near historically low levels while deciding it was too early to pull out of is current stimulus plans. The Fed also said the economy was improving especially in the housing and financial markets. The FOMC also decided to slow down its debt buying plan by extending its program to purchase mortgage-backed securities into the first quarter of 2010.

The U.S. Dollar turned an early weak session into a gain by the close of the day. The Dollar was trading lower when the Fed announced it would keep pressure on interest rates. This news triggered a spike up in foreign currency markets, but by the end of the day, the Dollar recovered, reversing the day in most Forex pairs.

The USD JPY is trading weaker this morning on speculation that Japanese investors are repatriating funds before the end of the first half of its fiscal year. Early in the trading session, it was reported that Japan’s exports fell for an 11th month in August. This may be cause for concern by the Japanese government as it has expressed some worry in the past that a rapidly rising Yen would have a negative effect on Japanese exports.

Technically, the USD JPY is in a position to post a secondary higher bottom which would be a strong indication that last week’s low at 90.13 could become a major support point. The daily chart also indicates that the main trend will turn to up when 92.53 is violated.

The GBP USD is under pressure this morning following comments from Bank of England Governor Mervyn King. Mr. King said to The Journal that significant weakness in the British Pound “will be helpful” to rebalance the U.K. economy by increasing exports.

The current chart formation suggests that the GBP USD has enough downside momentum to challenge the last two main bottoms at 1.6132 and 1.6112. The main trend is likely to remain under pressure. A rally through 1.6467 will turn the main trend to up.

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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