Strong U.S. Corporate Earnings Sink Dollar

The U.S. Dollar continued to weaken overnight. The weakness was ignited after the U.S. equity market close when Intel reported better than expected earnings.

The U.S. Dollar continued to weaken overnight. The weakness was ignited after the U.S. equity market close when Intel reported better than expected earnings. Early this morning, J.P. Morgan Chase reported a $3.6 billion profit triggering a secondary surge to the upside in U.S. equity prices. This helped to fuel greater demand for higher risk assets as traders sold off the Dollar.

Further weakness in the Dollar was triggered by a report which showed a drop in China’s exports. This drop in exports was smaller-than-expected and indicated that estimates for third-quarter growth may be revised higher. This interpretation helped speculators drive the Australian Dollar higher on the prospects of increased demand for Australian goods from China.

Pressure on the Dollar is also coming from remarks from Fed Vice Chairman Kohn. In a statement, he warned that the economy is likely to see a moderate recovery. This would keep a lid on inflation and interest rates.

This morning, traders will be reacting to the U.S. Retail Sales Report. Expectations are for a lower number because of the end of the U.S. cash-for-clunkers auto program. Later in the morning, U.S. Business Inventories may show a slight improvement from August. Later in the afternoon, the FOMC minutes will be released. This is report should shed some light as to why the Fed voted to leave interest rates unchanged, and extend its asset-buyback program into early 2010.

The EUR USD is getting a boost from greater demand for higher yielding assets. Early this morning new data showed output increased by 0.9%. This report was lower than expected but annual numbers came out in line with expectations. Euro traders once again chose to focus on the future and drove prices through 1.49 for the first time in a year.

The GBP USD continued to march higher following yesterday’s technically based closing price reversal bottom. The overnight rally was driven by a report which showed U.K. employers cut jobs at a slower-than-expected pace in September.

The USD CAD pushed lower overnight. Traders are becoming concerned that Bank of Canada officials may intervene if the Canadian Dollar continues to advance at its current robust pace.

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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