European Union Concerns Pressure Euro

The U.S. Dollar is trading higher across the board overnight. The strength in the Dollar is being attributed to overnight news that the European Union expressed concerns about the Euro rapid rise.

The U.S. Dollar is trading higher across the board overnight. The strength in the Dollar is being attributed to overnight news that the European Union expressed concerns about the Euro rapid rise. European financial ministers are expected to discuss the Euro’s rise at this weekend’s Group of 7 meeting. European authorities are worried about the rise in the Euro and its possible negative effects on demand for Euro Zone goods and services. This announcement has triggered a break in the Euro and sent spillover buying of the Dollar across all currency pairs.

Traders could also be bracing themselves ahead of today’s slew of economic reports. Today the market is expected to react to U.S. initial claims, Supply Management’s Manufacturing Report, Pending Home Sales, Construction Spending, Personal Income and Spending, and New Car Sales Data. In addition, Fed Chairman Bernanke is expected to talk today during market hours about new financial institution regulations. The combination of all of these reports should create volatility.

The EUR USD seems to be on path again to test a major retracement zone at 1.4444 to 1.4350. Yesterday’s rally did not damage to the current downtrend.

The three day rally in the GBP USD appears to be over. Based on the short-term range of 1.6467 to 1.5768, the British Pound completed a 50% retracement to 1.6125 and is not resuming its downtrend.

A possible intervention by the Swiss National Bank continues to weigh on the Swiss Franc. The USD CHF chart pattern indicates a test of 1.0534 to 1.0616 is likely over the short-run.

The USD JPY is also up overnight. Traders are concerned that despite recent comments to the contrary, the Bank of Japan would like to see some easing in the Japanese Yen. Look for the USD JPY to test 90.38 to 90.88 over the short-term.

Lower equity and energy prices could pressure the Canadian Dollar today. Over the short-term, the USD CAD has been range bound between 1.0589 to 1.0991 with 1.0790 to 1.0743 acting as a pivot zone.

Lower demand for higher yielding assets is pressuring the AUD USD and NZD USD. Overnight the Aussie made a new high for the year but is now in a position to post a closing price reversal top. Some traders are anticipating a rate hike in Australia by the end of the year. Others think the Aussie is too far ahead of itself based on current economic conditions.

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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