Momentum May Be Shifting in Dollar

It was a volatile week for the U.S. Dollar. However, a strong comeback on Friday allowed the Dollar to finish lower for the week, but well off of its lowest level.

It was a volatile week for the U.S. Dollar. However, a strong comeback on Friday allowed the Dollar to finish lower for the week, but well off of its lowest level.

For the week, the EUR USD managed to finish higher but off its high for the year at 1.4843. The European Central Bank left interest rates unchanged and predicted a rocky recovery.

The GBP USD finished lower for the week. Comments from Bernanke are making it look like the U.S. economy will recover well ahead of the U.K. economy. The Bank of England left interest rates unchanged at 0.50%. In addition, the BoE decided to maintain its asset-buyback program. The chart indicates that 1.5272 is the next major downside target.

The USD JPY had a volatile week. The Dollar initially weakened against the Yen as it looked as if U.S. interest rates would continue to fall. Traders drove this currency pair through the recent bottom but above the low for the year at 87.11. Traders were initially worried the Bank of Japan would intervene at the low levels, but that never happened. Comments from Fed Chairman Bernanke regarding a possible hike in U.S. interest rates have led traders to believe that the U.S. economy will recover faster than the Japanese economy and that the Yen would once again become the carry currency of choice.

The USD CAD closed sharply lower. Demand for higher risk assets such as equities and crude oil triggered the initial weakness, but it was a bullish Canadian unemployment report which eventually fueled the acceleration to the downside. A new swing top has been formed on the weekly chart at 1.099. The weekly chart also indicates that 1.0297 is the next downside target.

Talk of a possible hike in U.S. interest rates helped weaken the AUD USD and NZD USD on Friday. These moves were most likely position paring after a strong rally this week and not a sign of a change in trend. Australian Dollar traders will support this currency on any weakness because of the strong possibility of another rate hike by the Reserve Bank of Australia in November. The next rally could be tentative for the New Zealand Dollar because of hawkish comments from the Reserve Bank of New Zealand. The RBNZ is on record voicing its concerns about the value of the Kiwi and its possible negative effects on the economy’s 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

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