U.S. Dollar Expected to Open Lower

Trading is returning to normal today following yesterday’s U.S. bankholiday. Overnight, the Dollar initially stated to show strength, butthat quickly disappeared as demand for higher yielding assets showed nolet up in Asia and Europe.

Trading is returning to normal today following yesterday’s U.S. bank holiday. Overnight, the Dollar initially stated to show strength, but that quickly disappeared as demand for higher yielding assets showed no let up in Asia and Europe. Without any major U.S. economic reports today, look for the trend toward a weaker Dollar to continue. Earnings surprises could move the markets today.

The EUR USD is expected to open higher despite a weaker German consumer confidence number. Overnight it was reported that the German ZEW Survey fell to 56.0 from 58.8. This report, which showed the first decline in 4 months, surprised traders which led to initial weakness in the Euro. Investors ignored the news and the market’s reaction and quickly bought the weakness to turn the market around.

Recent economic reports suggest the Euro should be breaking but traders continue to push it higher. Investors are acting as if the economic data is aged and that better times are ahead.

The trend turned down in the GBP USD overnight when this currency pair broke through 1.5858. This action also helped form a new swing top at 1.6120. Additional selling pressure hit the market following the release of a disappointing U.K. inflation data report, but these losses were quickly absorbed by traders who began buying the weakness. If today’s low at 1.5706 turns out to be a bottom, then look for the start of a retracement to 1.5913 to 1.5962.

Sellers near the last swing top at 90.40 are preventing the USD JPY from changing the trend to up. The current selling pressure could drive this market down to 89.22 to 88.93. This area needs to hold in order to form a secondary higher bottom and trigger the start of a new rally. Traders are being cautious in this market at current levels because they feel the Bank of Japan may take action to prevent volatility and a rapid rise in the Yen.

Demand for higher yields is helping to drive up the AUD USD and NZD USD. Aussie traders are speculating that the Reserve Bank of Australia is going to raise rates at its next meeting in November. Strong consumer spending helped boost New Zealand retail sales in September. This, better than expected report, is helping to support a higher NZD USD this morning. Economists are now thinking this report is another sign that the economy is pulling out of its recession.

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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