U.S. Dollar Trades at Two Week Low

The U.S. Dollar Index reached its lowest level in two weeks overnight. Increased appetite for risk is helping to put downside pressure on the Dollar versus a basket of currencies.

The U.S. Dollar Index reached its lowest level in two weeks overnight. Increased appetite for risk is helping to put downside pressure on the Dollar versus a basket of currencies.

Yesterday, the U.S. Dollar was up most of the day before settling mixed. By the close of the day, the British Pound, New Zealand Dollar and Japanese Yen all managed to post modest gains versus the Dollar. Weak crude oil prices kept downside pressure on the December Canadian Dollar.

Early this morning the Bank of England and the European Central Bank will release their monetary policy statements. Both are expected to announce that interest rates will remain at historically low levels. The BoE will keep its benchmark rate at 0.50% and the ECB at 1.0%.

Traders are more interested in the comments about their respective stimulus plans. The BoE just recently increased funding of its plan while the ECB’s Trichet is on record calling for its plan to remain intact until the economy stabilizes. Look for the Dollar to continue to weaken against both of these currencies unless their statements contain some surprises.

The USD JPY is trading weaker overnight. Traders continue to push this currency pair toward its two week low. As the Yen rallies, traders are becoming more confident that the Bank of Japan will allow this appreciation as long it remains orderly and without excessive volatility.

Higher crude oil and equity markets should lend support to a rally in the Canadian Dollar. This currency is currently trading at the upper end of its range and could breakout to the upside if traders believe the Bank of Canada will refrain from intervening or characterizing the move as being excessive and damaging to the economy.

Overnight the AUD USD surged to another new high for the year, buoyed by the strong global equity markets and a better than expected Australian Unemployment Report. Traders are now more optimistic that the Reserve Bank of Australia will hike its benchmark interest rate again before the end of the year.

The NZD USD followed the Aussie higher, but gains were limited by comments from the Reserve Bank of New Zealand. The RBNZ expressed concerns about the rapid rise in the Kiwi and its possible negative effects on the New Zealand economy. The central bank is concerned that a high priced currency will hurt the country’s progress toward an economic recovery. .

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

Disclainer: